Commodity traders are in a rush to ship as much Venezuelan heavy crude to China as possible before a new fuel tax kicks in, causing a 40-50-percent rise in prices, Reuters reports, citing industry insiders and shipping data.
Over the last 12 months, China has seen a 13-fold increase in imports of bitumen blends, some 90 percent of which was actually heavy crude from Venezuela, according to data from cargo tracker Vortexa Analytics. The crude was labeled as Malaysian bitumen blend to avoid sanction action from the United States.
According to Vortexa, the average daily rate of Venezuelan oil imports into China over the past year was some 324,000 barrels, which represented about two-thirds of Venezuela's total exports of crude during the period.
However, things are about to change as China plans to introduce a tax on bitumen blend imports later this month. This will increase prices by 40 to 50 percent, and the flow of Venezuelan oil may well thin considerably.
"While not all of the 350,000 to 400,000 bpd of the additional bitumen flowing into China will disappear overnight, a large proportion of it will be at risk," an Energy Aspects analyst told Reuters.
U.S. sanctions have reduced Venezuelan oil output to some half a million barrels daily over the two years since they were introduced. Even though the Biden administration has extended a sanction waiver for several U.S. oil companies, including Chevron and Halliburton, PDVSA is struggling to maintain production.
Earlier this year, the state-owned oil major calculated it would need investments of $58 billion to boost production to where it was before Hugo Chavez rose to power in the late 90s. In 1998, Venezuela was pumping 2.3 million barrels of crude daily. The company said it planned to seek investments from both local and foreign companies to that end.
By Charles Kennedy for Oilprice.com
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