Venezuela’s jet fuel ex­ports soar even as air­lines cut ties

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - LU­CIA KASSAI AND SHERRY SU

Cash-strapped Venezuela is tap­ping U.S. and Euro­pean air pas­sen­gers to help pay its debts, even as air­lines cut routes to the coun­try.

Ex­ports of jet fuel to the U.S. and Europe more than dou­bled in April from March, data from the U.S. En­ergy In­for­ma­tion Ad­min­is­tra­tion and Euro­stat, the Euro­pean Union’s sta­tis­ti­cal agency, show. That may pro­vide some re­lief to state oil com­pany Petroleos de Venezuela SA, which has $3.2 bil­lion in in­ter­est pay­ments and prin­ci­pal ma­tu­ri­ties due this year, ac­cord­ing to Bloomberg data.

Jet fuel ship­ments are ris­ing be­cause do­mes­tic de­mand for air travel is fall­ing, said Eh­san Ul-Haq, a Lon­don-based di­rec­tor of crude oil and re­fined prod­ucts at Re­source Econ­o­mist Ltd. Hy­per­in­fla­tion has made flights pro­hib­i­tively ex­pen­sive for Venezue­lans, and protests that have left al­most 100 peo­ple dead are keep­ing for­eign­ers away. The U.S. rec­om­mends that Amer­i­cans avoid travel to the coun­try and is weigh­ing sanc­tions on Venezuela’s top of­fi­cials and a ban on oil im­ports.

“The Caracas air­port is con­sid­ered as one of the world’s most dan­ger­ous air­ports, and sev­eral coun­tries have warned their cit­i­zens against trav­el­ing to Venezuela,” Ul-Haq said. “Mean­while, the [Don­ald] Trump ad­min­is­tra­tion has threat­ened Venezuela with sanc­tions, and this could lead to a fur­ther dip in do­mes­tic de­mand.”

Jet fuel ex­ports from Venezuela climbed to a 15-month high of al­most 634,000 bar­rels in April, the lat­est En­ergy In­for­ma­tion Ad­min­is­tra­tion and Euro­stat data show. That’s some­what a sur­prise be­cause Venezuela’s do­mes­tic re­finer-

ies are op­er­at­ing at less than 50 per­cent of their in­stalled ca­pac­ity and are suf­fer­ing from break­downs and a lack of crude oil to process.

Venezuela needs the money, though.

The prob­a­bil­ity of the coun­try de­fault­ing on its ex­ter­nal bonds is the high­est in the world, ac­cord­ing to de­riv­a­tives traders, and the na­tion’s bench­mark 10-year bonds trade at just 46 cents on the dol­lar. De­spite dras­ti­cally cut­ting im­ports of food and medicine to con­serve the cash needed to pay bond­hold­ers, Venezuela’s for­eign re­serves have tum­bled to a 15-year low of about $10 bil­lion.

In the past three years, at

least seven air­lines have sus­pended routes to Caracas or re­duced the num­ber of daily flights in part be­cause they are try­ing to col­lect money from the Venezue­lan govern­ment, which must au­tho­rize the repa­tri­a­tion of earn­ings from ticket sales un­der Venezuela’s cur­rency con­trols. Air­lines have about $3.8 bil­lion be­ing held by the govern­ment, ac­cord­ing to the In­ter­na­tional Air Trans­port As­so­ci­a­tion trade group.

United Air­lines Inc. halted daily ser­vice from Hous­ton to Caracas this month. Amer­i­can Air­lines, Deutsche Lufthansa AG, Grupo Aeromex­ico SAB de CV, Latam Air­lines Group SA and Gol Lin­has Aereas In­teligentes SA can­celed routes to Venezuela in 2016.

“The funds will help, cer­tainly, but at these vol­umes, I don’t be­lieve this will re­ally

move the nee­dle,” Mara Roberts, a New York-based an­a­lyst for BMI Re­search, said of the jet fuel ex­ports. “Venezuela has dug them­selves into quite a big hole, and it’s go­ing to take some­thing more sub­stan­tial to help them out at this point.”

The rise in jet fuel ship­ments also may not last. De­mand for avi­a­tion fuel is strong now be­cause of sum­mer hol­i­days in the U.S. and Europe. But the U.S. has plenty of sup­ply: In­ven­to­ries were at a five-month high of 44.6 mil­lion bar­rels in April, above the fiveyear av­er­age, ac­cord­ing to En­ergy In­for­ma­tion Ad­min­is­tra­tion monthly data. They have since fallen to 39.2 mil­lion bar­rels, ac­cord­ing to En­ergy In­for­ma­tion Ad­min­is­tra­tion data ear­lier this month.

“I be­lieve U.S. de­mand is not sus­tain­able be­yond the

busier sum­mer travel sea­son,” Roberts said. “Also, Venezuela’s re­finer­ies are still sig­nif­i­cantly un­der­uti­lized due to a chronic lack of main­te­nance, which means sup­plies are likely not plen­ti­ful at the mo­ment.”

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