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Venezuela Demands Prepayment For Its Oil

Venezuela’s state-owned oil firm PDVSA has tightened the prepayment rules for its oil after a review of contracts, demanding now cargoes be paid in cash or in goods and services that should be received before loadings can take place, Reuters reported on Monday, quoting PDVSA documents it had seen.

Earlier this month, Venezuela’s PDVSA suspended most of its crude oil exports and some fuel exports for a review of the contractual terms, a review that was to be conducted under the new head of the company, Pedro Rafael Tellechea.

The review of the contracts under Tellechea – appointed by Venezuelan President Nicolas Maduro in early January – was aimed at making sure there would be no payment defaults. Since the imposition of U.S. sanctions on trade in Venezuela, PDVSA has had to resort to middlemen to market its oil, which has created complications with payments, Reuters noted earlier this month.   

Now, under the tougher rules, even long-term buyers of Venezuela’s oil should follow the new rules of prepayment, which say that PDVSA will have to receive the payment in full by cash before releasing oil for loading on tankers.

The new prepayment rules come shortly after the Biden Administration eased part of the sanctions imposed on Venezuela – initially slapped by former President Donald Trump – including granting U.S. supermajor Chevron, the only American company still operating in Venezuela, a six-month license that allows Chevron to import some Venezuelan crude oil to the United States for sale to U.S. refiners.

Earlier this month, reports had it that Chevron had recently sold 500,000 barrels of heavy Hamaca grade to U.S. refiner Phillips 66 to be used in its Sweeny, Texas, refinery, anonymous sources told Bloomberg.

Venezuela’s heavy crude oil is prized by U.S. refiners, who, until recently, looked to Russia’s heavy crude to replace it. In December, it was reported that several refiners were hitting up Chevron to get their hands on the rare Venezuelan crude oil.  

By Michael Kern for Oilprice.com

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