Reuters learned about the suspension of Venezuela’s oil supplies to Europe

Venezuela has suspended new supplies of crude oil to Europe after the US State Department allowed two companies to resume exports under an oil-for-debt deal. informs Reuters, citing three sources. Now Venezuelan oil company PDVSA is asking Italy’s Eni and Spain’s Repsol to provide fuel in exchange for future supplies.

Washington allowed shipments as long as cargo revenues were used to pay off PDVSA’s accumulated debt to joint ventures with Eni and Repsol, the agency said.

“PDVSA wants to go back to oil swaps, which is not yet possible,” said a source connected with cargo deliveries to Europe.

The supply of Venezuelan oil, especially to refineries in Spain, according to Reuters, allowed Europe to reduce purchases of Russian oil after the outbreak of hostilities in Ukraine. However, the deal did not provide PDVSA with the cash or fuel it needed: its refineries are struggling to produce gasoline and diesel after years of underfunding and lack of repairs.

Stocks of diluted crude oil at the port of José rose to almost 5 million barrels as of August 8, while information on the delivery of goods to Europe is not included in the PDVSA shipment schedule.

PDVSA wants to receive fuel in exchange for its oil and use part of the value of the cargo to pay off billions of dollars of debt to joint venture partners including Chevron, Eni and Repsol, the sources said.

Repsol CEO Josu John Imaz in late July called the return of shipments from Venezuela “good news” for his refineries, as the quality of the oil is a perfect fit for its refining system. In June and July, PDSVA’s export volume reached 545,000 bpd.

Five oil companies stopped swapping oil for debt in mid-2020 during former US President Donald Trump’s “maximum pressure” campaign that cut Venezuela’s oil exports but failed to oust President Nicolas Maduro, Reuters wrote earlier. Resume deliveries then allowed the US State Department. The sources explained that Eni and Repsol could set off the crude oil against unpaid debts and overdue dividends of Venezuela, provided that the oil is delivered to Europe without being resold “anywhere else”.

The US imposed an oil embargo and other sanctions against Venezuela in March 2019 after the US did not recognize Maduro’s re-election. Venezuela is deprived of the opportunity to legally sell oil to its traditional American market, the total export of which in 2019 provided the country’s budget with 96% of income.