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Sources: Venezuela's PDVSA sells oil only to companies with individual licenses

Four sources told us that Venezuela's PDVSA, the state-owned oil company, has refused to sell to companies who do not have individual U.S. licences. This is limiting the exports of oil and stopping the country from draining its brimming tanks more quickly.

Washington granted a "general license" that allows oil exports in general, as well as individual licenses for Trafigura and Vitol to export oil valued at billions of dollars. The permits came after a limited U.S. licence granted to Chevron in 2013 to export Venezuelan oil to the U.S.

Venezuela relies on the oil export revenues and needs them to run its government. The general licenses were created to exempt oil companies from U.S. restrictions on Venezuelan oil, which Washington has eased since the capture of Venezuelan President Nicolas Maduro in late January. Buyers of Venezuelan crude oil claim that the general license is not helping to facilitate trade in the way they need. Sources said that the broad nature of general license leaves many conditions open to interpretation and raises questions about what's allowed and what's not.

They said that PDVSA executives need specific U.S. advice on which companies they should trade with, and more clarity in the trading terms to track cargoes and ensure profits. Three sources claim that U.S. banking institutions have been reluctant to fund Venezuelan oil transactions due to the complexity of the licenses.

One of the sources stated that "some banks may not be willing to take the risk, or feel the activity was not authorized... banks could be doing more diligence." The banks' unwillingness to fund Venezuelan oil trading for the moment will have little impact on the world's largest traders, who are flush with cash after generating billions in profits over recent years. It is more likely to cause problems for smaller players who want to get involved in the Venezuelan oil market.

The White House said on Friday that the Trump administration had issued general licenses in record time due to the overwhelming interest of oil and gas companies investing in Venezuela's energy sector.

Taylor Rogers, a spokesperson for the President, said that "the team works around-the-clock to respond to requests from oil companies." PDVSA, the U.S. Energy and Treasury Departments and PDVSA have not responded to comments made immediately. Treasury Department’s Office of Foreign Assets Control issued two general licenses on Friday allowing oil and natural gas producers to operate within Venezuela. This is the largest relaxation of production-targeted sanction?yet.

QUESTIONS ANSWERED FOR NOW In a frequently-asked-questions release posted last week, the Treasury said oil sale transactions must follow commercially reasonable terms, or those "consistent with prevailing market and industry standards."

The document also stated that "a financial organization may rely upon the statements made by its customers that the transaction is in compliance with the terms of (license) 46 unless they know or have reason to believe otherwise." The statement did not go into further detail. Sources said that some potential buyers are waiting for the internal compliance clearances to be given before they engage with PDVSA. This is because terms will be clarified over time by Treasury and legal teams. The current general licenses for oil trading and sales do not permit the negotiation of debt repayments with oil cargoes, as did previous authorizations. Many PDVSA partners are facing a difficult situation, as their main goal is to recover millions of dollars that they owe.

PDVSA export schedules?updated in this week show that Vitol Trafigura, and Chevron continue to lift the lion's portion of Venezuela's crude oil exports. This is despite numerous meetings between the company and other companies including refiners from the U.S.

Shipping data revealed that Venezuelan oil exports increased to 800,000 barrels a day in January, up from 498,000 bpd in December. The levels are still below the average of last year, but this has prevented a massive depletion of stocks.

The traders are likely to resell Venezuelan crude oil to Europe and Asia, as refiners on the U.S. Gulf Coast struggle to absorb the surge of Venezuelan crude after millions were diverted from China in the past two months. Reporting by Arathy S. Somasekhar, Marianna P. Parraga, Nicole Jao, Saeed Azhar, Rob Harvey, and Dmitry Zhdannikov, London. Editing by Nathan Crooks, and Chizu Nomiyama.

(source: Reuters)