EXCLUSIVE-PetroChina holds off from buying Venezuelan oil marketed under US control, sources say

By Chen Aizhu

SINGAPORE, Jan 27 (Reuters) - State-owned PetroChina has told its traders not to buy or trade Venezuelan crude since Washington took control of the OPEC producer's oil exports this month, two trading executives familiar with the situation said.

The listed unit of Chinese major CNPC was the largest single offtaker of Venezuelan oil until early 2019, when it halted imports after U.S. President Donald Trump imposed sanctions on Venezuela's oil sales during his first presidential term.

PetroChina's decision to refrain from buying as it assesses the situation is further evidence that Venezuelan oil supply to China, which was its biggest customer, will remain tight and nudge Chinese buyers towards Canada, Iran and Russia instead.

The trading executives sought anonymity because the matter is sensitive.

PetroChina 601857.SS, the parent firm of which is a major investor in Venezuela's oil sector through the Sinovensa joint venture with PDVSA, did not respond to a request for comment.

The world's biggest oil importer, China has condemned Washington's move to redirect Venezuelan oil exports to the U.S. and away from Beijing.

TRADING HOUSES MARKET VENEZUELAN OIL

Trading houses Trafigura and Vitol began marketing Venezuelan oil this month after an agreement between Caracas and Washington for the U.S. to control 50 million barrels after its January 3 capture of President Nicolas Maduro, with proceeds going to a U.S.-supervised fund.

Trump said the United States has also seized oil on board Venezuelan tankers for processing in U.S. refineries.

Vitol and Trafigura have sold Venezuelan crude to refiners including U.S.-based Valero VLO.N and Phillips 66 PSX.N and Spain's Repsol REP.MC and have also approached Indian and Chinese refiners, including PetroChina, for possible sales, Reuters has reported.

However, one of the trading executives said PetroChina traders were told not to touch the oil until further notice from headquarters.

UNCOMPETITIVE PRICES

In addition to concerns around U.S. control of Venezuelan oil, offers from traders for the oil are not competitive with other grades such as Canadian crude, according to the second trading executive.

Discounts for Venezuelan heavy crude Merey delivered to China have narrowed by about $10 a barrel since December, traders said, deterring purchases.

Vitol has offered Venezuelan oil to Chinese buyers at discounts of about $5 per barrel to ICE Brent for April delivery, trade sources said. That compares with trades in December done at a discount of about $15 a barrel for cargoes that left Venezuela before the U.S. blockade.

Vitol did not immediately respond to a request for comment.

OIL FOR DEBT

PetroChina is also assessing the potential impact of any imports under Venezuela's debt-for-oil programme with China, the second executive said.

Caracas has used oil to repay billions of dollars in loans to Beijing in debt-for-oil deals, but sources told Reuters this month that redirecting crude to the United States could mean reallocating cargoes originally bound for China.

Traders and analysts expect Chinese crude imports from Venezuela to slump, starting in February.

While China is the biggest buyer of Venezuelan crude, the oil accounted for only about 4% of its oil imports, mostly bought by small independent refiners known as teapots.