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Sanctions lifted on Venezuelan oil: Impact in Asia

With the lifting of sanctions on Venezuelan oil, Asian buyers, particularly China and India, could face increased competition for Latin American cargoes, potentially driving them to Middle Eastern sources.
Les Acheteurs de Pétrole Asiatiques Face à la Concurrence

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The recent lifting of sanctions on Venezuelan oil raises questions about its impact on Asian buyers. While China’s independent refineries continued to buy Venezuelan oil despite the sanctions, India and other Asian buyers largely refrained from purchasing this type of oil.

Impact of the Lifting of Sanctions on Asian Oil Buyers

 

US oil companies are now allowed to explore and invest in Venezuela, and US refineries can buy directly from PDVSA. This could lead to a reduction in purchases of Venezuelan oil by China and an increase in purchases by the United States, as Venezuela seeks to generate liquidity. Venezuelan oil will now have to compete with other heavy oil grades from Latin America and Canada on the US Gulf Coast market.

Competition for Latin American Cargoes

 

China’s independent refineries imported around 360,000 b/d of crude oil and 110,000 b/d of fuel oil from Venezuela in September. However, trade sources in China fear increased competition from the USA, Europe and India following the lifting of sanctions.

Chinese and Indian Oil Import Trends

 

During the pre-sanctions period from 2017 to 2019, India imported around 300,000 b/d of Venezuelan crude oil, mainly through private refineries such as Reliance Industries and Nayara Energy. Indian government officials have indicated that future crude oil imports from Venezuela will be in line with the country’s energy security policy. Nevertheless, analysts believe that the prospect of increased Venezuelan oil flows to India could change in the medium to long term.

Middle East Acid Crude Oil Price Concerns

 

Many refineries in North-East and South-East Asia fear that the lifting of sanctions on Venezuela could lead to higher prices for Middle Eastern sour crude oil if independent Chinese refineries reduce their imports from Venezuela. This could have an impact on Dubai’s crude oil price structure, which has already shown signs of fluctuation.

The lifting of sanctions on Venezuelan oil presents a potential change in the dynamics of Asian oil imports. China and India, as major buyers, face the challenge of increased competition from other regions, particularly the USA and Europe. While the immediate impact may be uncertain, the long-term effects on Asian oil sourcing strategies could lead to diversification away from traditional Latin American suppliers towards the Middle East.

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