Freight Costs Hit Venezuelan Oil Exports as Vitol and Trafigura Seek Discounts
Two major oil trading firms, Vitol and Trafigura, are negotiating with Venezuela's state-owned oil company PDVSA for discounted prices on crude oil exports. The companies have been among the biggest winners in controlling Venezuela's oil flows since January when US authorities pushed to reactivate the country's oil sector.
The recent rise in freight costs is putting pressure on Vitol and Trafigura, as they are now bidding $18 to $20 below Brent for cargoes bound for the US or Europe. This means that PDVSA and its partners would have to sell the crude at a $16 discount to the benchmark, which is already facing market conditions.
The formula price for Venezuela's flagship Merey heavy crude grade increased to $76.82 a barrel in August from $67.36 in July, but it remains some $14 below Brent. The cost of chartering an Aframax tanker has risen significantly, with rates increasing by 157% since the start of the year.
Venezuela's oil exports remained almost unchanged in August at 1.17 million barrels per day, while Vitol and Trafigura managed to maintain their export volumes stable at some 597,000 bpd.