China Cuts Back on Venezuela Oil Purchases After U.S. Sanctions Relief

Chinese independent refiners, the biggest customers of Venezuela’s crude before the U.S. sanctions relief, are now holding back fresh purchases of oil from the Latin American country due to unpredictable discounts on cargoes after international majors returned to Venezuelan trades, trading sources in China have told Reuters.

China and its independent refiners were buying Venezuelan crude even under the U.S. sanctions, providing an outlet to Venezuela’s oil. But now the trades with crude from the country holding the world’s largest reserves are in “disarray” and discounts cannot be predicted, the sources told Reuters.

Chinese refiners are also reducing Venezuelan oil intake because of a seasonal drop in demand for asphalt, for which Venezuela’s heavy crude is suited.

Before the U.S. eased the sanctions on Venezuela, Chevron was the only Western major with a special exemption from late 2022 to operate in Venezuela and export crude from the country holding the world’s largest crude oil reserves.    

The easing of the sanctions now allows the production, lifting, sale, and exportation of oil or gas from Venezuela, and the provision of related goods and services, as well as payment of invoices for goods or services related to oil or gas sector operations in Venezuela.

As a result, the top international oil trading houses are back in the business of trading with oil from Venezuela.

Some of the largest independent oil trading houses are already offering Venezuelan cargoes, including to U.S. buyers. Commodity giants have also struck deals to buy crude from intermediaries approved by Venezuela’s state-owned oil company PDVSA.  

Vitol Group, the world’s largest independent oil trader, has hired a supertanker to load oil from Venezuela, lists of ship charters compiled by Bloomberg showed last week.  

Meanwhile, Venezuelan Oil Ministry officials said on Wednesday that output had reached 850,000 barrels per day (bpd) after the easing of the sanctions. Analysts, however, don’t see Venezuela having the ability to raise production too much in the near term. Venezuelan oil production is unlikely to jump above 900,000 bpd by the end of 2024, according to the U.S. Energy Information Administration (EIA).   

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

• Oil Prices Remain Depressed After OPEC+ Shocked Markets
• IEA: Big Oil Faces ‘Moment of Truth’ Over Renewables Investment
• Oil Spill Shuts In 3% of Daily Production in the Gulf of Mexico