Tuesday, June 5, 2018

Venezuela Fails To Meet Crude Oil Contracts -- June 5, 2018


June 11, 2018: update.

June 7, 2018: 24 million bbl backlog; Venezuela's fate looks very, very bleak

June 6, 2018: nominee for 2018 Geico Rock Award?

Later, 7:58 p.m.: this screenshot --
The embedded link takes you to this story: China independents look for other crude oil grades to cover Venezuelan shortfall.

Later, 7:38 p.m.: link here --
Venezuela's state-owned PdV is considering a declaration of force majeure on some of its oil supply contracts in June unless its clients agree to accept volume reductions of up to 50pc, PdV officials tell Argus.
PdV's tumbling crude production, chronic breakdowns of its heavy crude upgraders and difficulty importing critical light crude and naphtha are progressively reducing the amount of oil available for export. The company was already taking advantage of flexibility in its supply contracts to shave off up to 10pc in export volumes.
But larger cuts are now looming.
PdV "in the best case only has about 695,000 b/d of crude supply available for export in June," a PdV marketing division executive said.
Because the distressed company's problems are structural, any force majeure declaration would set a commercial bar that the Opec country could not quickly overcome.
PdV is asking its principal clients that are collectively owed 1.5mn b/d of crude in June to accept smaller volumes and restructure existing supply contracts for up to one year.
Among the drivers behind PdV's supply deficit is ongoing maintenance at its PetroPiar upgrader in which Chevron owns a 30pc stake. The facility, which has been off line since early May, supplies about 160,000 b/d of synthetic crude to the country's export portfolio. Maintenance will last through the end of June at the earliest, PdV officials say. Chevron declined to comment.
Three other upgraders, all run by PdV, are in poorer operational condition.
PdV could invoke force majeure if new supply deals involving smaller volumes cannot be worked out with clients such as Chinese state-owned CNPC, India's Reliance and Russia's Lukoil.
The energy ministry likely would attribute a force majeure declaration to US financial sanctions and the effects of its debt-related dispute with US independent ConocoPhillips that severed PdV's Dutch Caribbean logistics last month. From the perspective of Venezuela's increasingly isolated government, the strategy would boost its international case against sanctions by adding pressure to the oil market.
The company's June obligations include 1.27mn b/d of 16°API Merey blend to eight clients, including Valero, Nynas and Tipco.
Original Post

Link here.
"Among the affected clients due to the low availability of crude to export are Nynas, Tipco, Chevron, CNPC, Reliance, Conoco, Valero, and Lukoil, which will partially receive the volumes established by the contracts."
The amount the company will not be able to supply is close to half of the total committed volumes of this grade, Merey 16, for June.
It only has 578,000 bpd of the grade available, while the total contracted volume is 1.271 million barrels daily.
PDVSA’s total crude commitments for the month stand at 1.495 million bpd, but it only has 694,000 bpd available.
You can bet the US refiners (Chevron, Conoco, and Valero) are scrambling -- and paying top dollar -- for supplies from other sources. And then folks wonder why the price of gasoline goes up.

Did President Trump know this when he asked Saudi Arabia to increase production? Did President Trump have inside information? Did the Trump administration use inside information when it "quietly" asked Saudi Arabia to increase production? Did the Trump administration break protocol?

These are no doubt the questions CNN is asking.

Why did President Trump not tweet this? Is this fake news? If true, why did the Trump administration not alert us before it was announced by oilprice.com and most likely, others? I assume MSNBC is asking these questions.

Does this explain why WTI turned "green" today? And not by just a little bit. WTI is up 75 cents/bbl. Too bad it's the "wrong kind" of oil. But drillers can "exchange" oil on the open market.

The dots connect.

For newbies: US refineries are optimized for heavy oil. The US is producing light oil, not heavy oil. US refineries need heavy oil to "balance" light oil before they can refine it. Sources for heavy oil for the US: western Canadian oil sands; Venezuela; Saudi Arabia.

The whole purpose of the Keystone XL was to ensure an adequate source of heavy oil for US refiners. The US oil industry knew that two of three sources (Venezuela and Saudi Arabia) were not as reliable as western Canadian oil, and thus, for national security reasons, it can be argued, planned to build the Keystone XL with private funds which would benefit all Americans. But President Obama killed the Keystone XL when the state of Nebraska failed to approve the route of the pipeline. What a doofus. Even Justin Trudeau seems to have better sense than the former US president.

And, now folks are, again, complaining that the price of gasoline is increasing. As Maureen Dowd said, President Obama was just too good for us. Say what? Thank goodness for term limits.

Has Never Happened Before 2018

Has now happened twice in 2018: job openings (6.7 million) exceeds workers (6.4 million).

Speaking Of Fulfilling Contracts ... US Social Security

From The WSJ:
The Social Security program’s cost will exceed its income this year for the first time since 1982, forcing the program to dip into its nearly $3 trillion trust fund to cover benefits.
By 2034, those reserves will be depleted and Social Security will no longer be able to send it its full scheduled benefits, according to the latest annual report by the trustees of Social Security and Medicare released Tuesday.
Unless Congress acts to bolster the program’s finances, beneficiaries would receive about three-quarters of their scheduled benefits after 2034.
If you actually read the whole story, and not just the headline, the report is actually not all that bad (for Social Security):
Social Security consists of two programs, one for retirees and one for people who claim disability benefits. Taken separately, the retirement program’s reserves are depleted in 2034, a year sooner than projected in last year’s report.
The disability fund is expected to run out in 2032, as opposed to 2028 in last year’s report. 
For Medicare? That's a different story. That's in big, big trouble.

2034? I'll be in my 80's. A minor tweak to Social Security benefits now will easily extend the program for another 15 years. Medicare? Maybe ObamaCare will help solve this problem. Thank goodness it was not repealed.

Oh! Carol, Neil Sedaka

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