VENEZUELA - Destination Curbs.

In its spot sales, PDVSA imposes restrictions on the destination of fuels tendered. The curbs are mainly against the US market. As a result, PDVSA has been losing a premium on ultra low-sulphur diesel (ULSD), a top quality fuel being exported mainly to Europe. The ULSD, with a maximum sulphur content of 50ppm, meets the Europe Union's strict sulphur specifications.

The destination curbs and limited demand in Latin America have compelled PDVSA to send surplus ULSD and gasoline to Europe, a market over-supplied with these fuels at a time when the US Gulf Coast remains acutely short of oil products following Hurricanes Katrina and Rita. As a result, US prices of gasoline and diesel are high, whereas in Europe the prices are low. But the Venezuelan ULSD does not meet the EU's cold property requirements on cloud point and cold filter plugging point. Petroleum Argus on Oct. 24 said this was weighing on the ULSD's price in Europe "now that tighter winter specifications have come into force". Argus said one cargo was selling at $30/ton below the price of diesel which meets the EU rules. In addition, PDVSA is losing the benefit of its fuels being much closer to the US Gulf Coast than to Europe, a market now flooded with distillates.

Earlier this month PDVSA issued a tender to sell 210,000 barrels gasoline. About 90,000 barrels were scheduled to depart the Bajo Grande terminal on Nov 14-16. The remaining 120,000 barrels were load from La Salina terminal on Nov 17-19. Deal terms included destination restrictions to the US Gulf Coast, US East Coast or Canada.

Chavez Threatens Oil Exports To US: President Chavez, with Marxist leanings and close to Cuban leader Fidel Castro, on Aug. 15 used the anniversary of his victory over a recall referendum to attack US-style capitalism, having earlier threatened to end oil exports to the American market. He beat off attempts to have his term of office suspended in a referendum on Aug. 15, 2004 and has since moved to strengthen his hold on power with several controversial policies.

During a special ceremony, Chavez said it was "a revolutionary day in which the force of the revolutionary Bolivarian democracy was expressed with all its magnitude". In a three-hour speech to celebrate South American Revolutionary hero Simon Bolivar, he underlined his Bolivar-inspired "road to socialism". He called capitalism "the main cause of hunger and poverty in Latin America", having become an increasingly outspoken critic of the US. Trying to diversify Venezuela's oil markets, he threatened to end oil exports to the US if it did not stop its "aggressions". He said: "We do not want to break relations with the US government. It is not in our plans, but if the aggressions continue to increase...this could put at risk diplomatic relations between Venezuela and the US". He said of Venezuela's biggest oil market: "The US is not indispensable to us". But most of Venezuela's external investments are concentrated on the US.

Chavez, who has called US President George W. Bush a "jerk" and "Mr. Danger", joked that he may give the US leader a scare at the Summit of the Americas in Argentina in November. "I have something in mind", he. "I will walk to him very quietly and say 'boo'". But he did not do that when the summit took place. The former paratrooper has accused Bush of plotting to have him assassinated and of being behind a coup which toppled him for nearly 48 hours in April 2002.

On Aug. 12, Vice President Jose Vicente Rangel said Venezuela had withdrawn diplomatic immunity for US anti-narcotics agents after the Bush administration withdrew visas for Venezuelan officials in Washington.