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Oil prices rose this week…

Venezuela Is Still Exporting Oil To China Despite Sanctions

Venezuela is still sending oil to China despite stifling U.S. sanctions, Bloomberg has reported, citing shipping data from Kpler.

As of this Monday, the data suggested, there were 3.3 million barrels of Venezuelan crude waiting to unload at Chinese ports and another 5 million barrels en route to the port of Qingdao.

“Most of the oil reaches China after a simple ship-to-ship transfer, often with both transponders online,” TankerTrackers.com co-founder Samir Madani told Oilprice.com. The STS, Madani said, most often took place in the Strait of Malacca or the South China Sea, in the most open fashion as the participants believed they had not been detected loading the cargo in Venezuela.

Asian refiners, and Chinese refiners specifically, have a taste for Venezuelan oil, which is heavy and sour, and their refineries are equipped for processing such grades. But now there is also a jump in demand for bitumen as the country reopens after the lockdowns. Heavy crude contains more superheavy fractions that yield bitumen when processed.

“Bitumen margins have been quite strong since late last year and as China accelerates resumption of economy, demand is very much supported,” one analyst with Energy Aspects told Bloomberg.

Related: India Looks To Double Oil Refining Capacity By 2030

In fact, China never stopped buying Venezuelan oil despite tightening sanctions. Most recently, these targeted tanker owners and companies that use them to transport crude oil, with plans to blacklist any vessel that has called at a Venezuelan port over the past 12 months.

Yet even before this latest threat from the U.S. administration, ship-to-ship transfers were a frequently used way to disguise the origin of oil cargos, and China has been using them a lot to disguise Iranian and Venezuelan shipments destined for Malaysia before they are routed to China.

A recent analysis by Reuters revealed that the STS approach was systematic. Last year, the average number of Venezuelan oil barrels that China imported came in at 283,000 bpd, 24 percent more than the official number reported by Chinese authorities.

Meanwhile, however, overall Venezuelan oil exports continue to fall. Over the first half of June they averaged 325,000 bpd, according to a Reuters report, down from 452,000 bpd in May. This is the lowest rate of Venezuelan oil exports in more than seven decades.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on June 17 2020 said:
    What matters is that Venezuela is exporting its oil to China and elsewhere and China is receiving crude oil shipments from Venezuela despite the most intrusive US sanctions.

    Between July and December, 18 tankers carried a total of 19.7 million barrels (daily average of 107,000 barrels) of Venezuelan crude oil to Chinese ports and now Bloomberg is reporting that there were 3.3 million barrels of Venezuelan crude waiting to unload at Chinese ports and another 5 million barrels en route to the port of Qingdao. On average, China has been buying 283,000 barrels a day (b/d) from Venezuela and it makes not a jot of difference about the way the Venezuelan crude is reaching China.

    The truth of the matter is that China has never stopped buying Venezuelan oil despite tightening US sanctions. And China isn’t the only country defying US sanctions and buying Venezuelan crude. India has been buying more than 300,000 b/d) of Venezuelan crude. This brings total exports to China and India alone to 583,000 b/d when Reuters is reporting that Venezuelan exports averaged 325,000 b/d in June.

    China doesn’t recognize US sanctions on Iran and Venezuela and has been completely ignoring US sanctions by continuing to deal with both countries accounting for 31% of Iranian crude oil exports or 659,000 barrels a day (b/d) and also continuing to receive Venezuelan crude oil in payment for loans it has extended to South American country.

    And just recently Iran challenged US sanctions by sending five tankers loaded with refined products for Venezuela as well as diluents and equipment and workers for its refineries.

    Even Mexico announced yesterday that it is prepared to defy US sanctions on Venezuela and deal with the South American country.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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