InvestingDaily.com

Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close
FEATURED STRATEGY

$1,230 in Instant Income?

$1,230 in Instant Income?Our top income expert recently pulled the wraps off his breakthrough moneymaking technique. And he proved beyond a shadow of a doubt how you can use it to generate instant cash payouts of up to $1,230 (or more). Over and over again. But then he took things a big step further and guaranteed you can make $1 million by following his program. And the second he did, our phones went nuts! Space is limited — get the details here.

 

 

Sanctions On Venezuela Could Benefit U.S. Refiners

By Robert Rapier on July 25, 2017

Last week it was reported that the Trump Administration is considering significant sanctions on Venezuela. The threat of sanctions is in response to Venezuelan President Nicolas Maduro’s pledge to rewrite his country’s constitution on July 30. President Trump promised that if he followed through, the U.S. “will take strong and swift economic actions,” which could impact Venezuela’s oil exports to the U.S. A decision is expected as early as this week.

According to the most recent data from the Energy Information Administration (EIA), Venezuela presently exports 800,000 barrels per day (BPD) of oil to the U.S. Venezuelan imports rank third behind Canada and Saudi Arabia, but Venezuela is the top source of foreign oil for U.S. Gulf Coast refineries.

How might the loss of Venezuelan crude impact refiners in the U.S.? Let’s investigate.

EIA data indicate that 13 US refineries imported Venezuelan crude in 2016. Here is the breakdown of all 13, in order of descending amount of crude processed:

The Phillips 66 (NYSE: PSX) Refinery in Sweeny, Texas imported just over 46 million barrels of Venezuelan crude last year, the most of any US refinery in 2016. However, this was the only Phillips 66 refinery to use Venezuelan crude. Nevertheless, the capacity of this refinery is about 80 million barrels of crude per year, which means more than half of its crude slate last year was sourced from Venezuela. However, across the entire company, Venezuelan crude amounts to under 6% of Phillips 66’s total crude oil capacity for all its refineries.

Where things start to get interesting is with Citgo, which is owned by Venezuela’s state oil company, PDVSA. Citgo’s Lake Charles, Louisiana, refinery imported nearly 45 million barrels of Venezuelan crude in 2016. Another Citgo refinery in Corpus Christi, Texas imported 21.5 million barrels.

The two Citgo refineries consumed 26.6% of the oil imported from Venezuela, which makes it the most important destination for Venezuelan crude. Citgo is clearly in the worst position of any refiner, as it would need to source oil from elsewhere, and since Venezuela is strapped for cash, it might simply have to ramp down operations. That could benefit other U.S. refiners operating on the Gulf Coast.

Another refiner that could feel the sting of sanctions is Valero (NYSE: VLO), which processed Venezuelan crude in three of its refineries. The total amount processed was 53.8 million barrels (21.6% of Venezuelan imports), second only to Citgo. However, Valero processes more crude oil globally than any other independent petroleum refiner. According to Valero’s 2016 annual report, Venezuelan imports are equivalent to only about 6.5% of the crude Valero processed in 2016. So this may be more a perception issue than a serious risk to Valero’s business — although it could have a significant impact on specific Valero refineries.

PBF Energy (NYSE: PBF) imported a total of 22.4 million barrels of Venezuelan crude into two refineries it owns — Chalmette Refining in Louisiana and Delaware City Refining.

Shell (NYSE: RDS-A) imported 538,000 barrels of Venezuelan crude in its refinery in Martinez, California, and Motiva Enterprises, a 50–50 joint venture between Shell Oil Company and Saudi Refining, imported another 15 million barrels into its Port Arthur, Texas refinery.

Chevron (NYSE: CVX) used 32.5 million barrels of Venezuelan crude in its Pascagoula, Mississippi refinery, and Total (NYSE: TOT) used 9.7 million barrels in its Port Arthur refinery. Finally, Marathon Petroleum (NYSE: MPC) used 2.7 million barrels in its Garyville, Louisiana refinery.

Conclusions

The Trump Administration has said that action could be imposed this week on Venezuela and that all options are on the table. A full ban of Venezuelan crude would indeed impact refiners, but some are more exposed than others. Citgo is at most risk of having to curtail operations in response to sanctions, which could benefit other refiners in the U.S.

We are watching these developments closely in The Energy Strategist. This week I provided updated advice for one refiner that has done well since being added to the portfolio last fall, and I am awaiting the decision on sanctions before providing guidance on others. 

Follow Robert Rapier on Twitter, LinkedIn, or Facebook.


You might also enjoy…

 

Here’s What’s Really Going to Crush the Market

Most folks understand the basic concept of inflation… things cost more money. But tragically, most don’t understand the real implications of what it means for their financial future. 

Or just how dangerous it’s becoming right now. Today.

And there are two reasons for that…

First, the U.S. government’s calculations barely take into account two of the things you and I are paying more and more for every day: energy and food.

Second, since inflation really hasn’t been an issue for the past 30 years here in the U.S., most analysts won’t dare to say it’s on the rise because they’ll suffer professionally. 

But I’ve made a name for myself by always saying what needs to be said. Which is why I’ve prepared a new special report that’ll give you simple instructions on how to protect yourself from the coming storm.

And better still…

It gives you the full story on the six types of investments that are destined to soar 275%… 375%… even up to 575% over the next few years as the winds of inflation flatten the U.S. economy.

You can get your free copy here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.