Valero, Phillips 66 Acquire Venezuelan Oil in Washington-Caracas Agreement

Major developments have unfolded in the oil market as Valero and Phillips 66 secure Venezuelan crude under a recent Washington-Caracas agreement. This historic arrangement allows U.S. refiners to import up to 50 million barrels of Venezuelan oil, marking a significant shift in trading dynamics.

Valero and Phillips 66’s Landmark Purchases

According to reliable sources, Valero has acquired a cargo of Venezuelan oil from the trading house Vitol. Phillips 66 has also participated in this deal, making it one of the first instances of U.S. Gulf Coast refiners engaging in such transactions under the new agreement.

• Both companies purchased the crude at a discount of $8.50 to $9.50 per barrel compared to Brent crude.
• These purchases are significant as they are the first by U.S. refiners from newly licensed trading houses.
• Vitol and Trafigura were the first firms authorized by the U.S. government to trade Venezuelan oil after recent political changes in Venezuela.

Background on U.S.-Venezuela Oil Trade

Prior to sanctions imposed in 2019, U.S. Gulf Coast refineries processed nearly 800,000 barrels per day of Venezuelan heavy oil. The recent deals by Valero and Phillips 66 indicate a potential revival in those trading relationships.

Current Oil Pricing and Logistics

The Venezuelan oil obtained by U.S. companies is priced at a $15 discount to the global Brent benchmark. U.S. Energy Secretary Chris Wright confirmed that these initial sales of Venezuelan crude are worth approximately $500 million.

• The cost to transport this crude to the U.S. Gulf Coast varies between $2.5 and $3.5 per barrel.
• Once shipped, traders could expect a profit margin of $2 to $4 per barrel.

Market Outlook and International Interest

Offers for the Venezuelan flagship Merey heavy crude to U.S. refineries commenced at a discount of $6 to $7.50 per barrel. However, the interest in these offers has been less than anticipated, prompting price adjustments.

Additionally, offers to Indian refiners were also met with minimal demand, priced at $8 to $8.50 below Brent.

The engagement of Valero and Phillips 66 in these new transactions represents a pivotal moment for the U.S. oil market amid changing global dynamics. The long-term impacts of these deals remain to be seen as the landscape of oil trading evolves.