Page 5 - LatAmOil Week 23 2020

LatAmOil COMMENTARY LatAmOil

Maduro’s government probably did not take described initial efforts to spread the fuel around
these steps without some trepidation, given that the country as “chaotic” on June 5. It also said
the country’s last attempt to reduce gasoline sub- that the Iranian supplies had started running out
sidies in 1989 did not go well. Instead, it led to quickly because demand was so strong that driv-
a violent uprising now known as the Caracazo. ers were trying to buy as much fuel as they could.
But as Reuters noted on June 7, Venezuelans
do not seem to have too many objections to the Potential for discontent
new strategy – at least not yet. Instead, they are Under these circumstances, the political opposi-
queuing up to buy fuel at the higher (but still tion’s promise to act quickly to reverse the short-
subsidised) rates from regular filling stations ages may start to sound more enticing.
or heading to less busy sites where they can pay Earlier this week, the opposition claimed in
world market rates for gasoline without running its new fuel supply strategy, called Plan Pais, that “
up against the monthly quota system. it was capable of restoring regular and adequate PdVSA has set
supplies within just two weeks. If Maduro steps
Available quantities down in favour of Guaido, it said, the latter will aside about
It remains to be seen whether attitudes change, be able to work out a swap deal with PdVSA’s
and if so, how quickly. There is reason to believe US-based subsidiary Citgo. The swap would see 100,000 barrels
that they will change, though. PdVSA supplying crude oil to Citgo in exchange
Not all of the gasoline brought in from Iran for deliveries of refined petroleum products, of Iranian
will be staying in Venezuela. Argus Media last in quantities large enough to meet domestic gasoline for Cuba
week cited three PdVSA officials with knowl- demand and also to load up storage facilities, it
edge of the matter as saying that some of the fuel explained.
was being transferred from Venezuela to Cuba. According to Plan Pais, this strategy would
According to the sources, PdVSA has set help ensure that Venezuela received enough gas-
aside about 100,000 barrels of Iranian gasoline oline and diesel to keep covering demand until
for Cuba. They told Argus Media on June 5 that PdVSA’s two largest refineries could be brought
the Carlota C, a Cuban-registered vessel also back online.
known as the Maria Cristina, had docked at El These facilities, the 635,000 bpd Amuay plant
Palito, Venezuela, in preparation to transfer the and the 305,000 bpd Cardon plant, are badly in
gasoline into its tanks. Shiptracking data show need of repair. PdVSA has not been able to fix
that the ship’s previous port of call was Moa, them and restore them to regular operations
Cuba. PdVSA has used the vessel before to move because the US sanctions regime limits its access
Venezuelan crude oil to Cuba. to parts and equipment. As a result, domestic
So far, Caracas has not said exactly how much petroleum supplies have become extremely
Iranian gasoline PdVSA has received. But if the unreliable.
company is diverting 100,000 barrels from the The problem with this strategy is that it
total for shipment to another country, it fol- hinges on Maduro’s removal from office – and
lows that there will be less available for sale to there is no sign yet that Venezuelans are ready
Venezuelan drivers, who have already endured to take this step. Even so, if the Iranian gaso-
months of shortages. line runs out quickly and Caracas cannot easily
At the same time, there are also reports of secure more, discontent may rise – especially in
problems with the distribution of the gasoline the face of the opposition’s promises to make the
that has remained in Venezuela. Argus Media shortages a thing of the past. ™

OPEC+ group breaks deadlock

After a week’s wrangling, OPEC+ has agreed to extend the production cuts agreed for May and June

LAST week, we looked forward to OPEC+ and The agreement, which is still to be ratified,
its allies coming together to decide whether to would mean that OPEC+ will extend its record
WHAT: prolong historic output cuts. The length and production curbs for another month until the
OPEC+ will extend oil extent of production curtailments remaining in end of July. On the news, Brent crude, the global
output cuts for a month. place would be crucial to sustaining crude’s rally benchmark, edged higher, nearing $40 a barrel.
after a record rebound last month. The 23-nation partnership between the
WHY: A week on and after considerable wrangling Organisation of Petroleum Exporting Countries
The end of the deal put oil and hitting a temporary impasse, the group and other major producers has helped engineer
price recovery at risk. agreed a tentative deal, which crucially, included a doubling in Brent prices since April. The oil
holdout member Iraq. Saudi Arabia and Russia price surge has revived the fortunes of major
WHAT NEXT: applied pressure on Iraq to get it to agree to make energy companies such as ExxonMobil and
The new quotas will stay its share of cuts and to compensate for failing to Royal Dutch Shell, and reduced the fiscal hole
in place until July 31. comply in the past. in the budgets of oil-rich nations.

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