Resumption of Venezuelan Crude Oil Trade with India Following US Sanctions Lift

Navigating New Waters: India Resumes Venezuelan Crude Imports Amidst Eased US Sanctions

Oil tanker in port, Venezuela

In the aftermath of the United States’ decision to lift sanctions on Venezuela, a significant development has unfolded in the maritime sector as Indian refiners initiate the procurement of Venezuelan oil through intermediary channels. Among these refiners, Reliance Industries is slated to engage in discussions with officials from Petróleos de Venezuela, S.A. (PDVSA) in the upcoming week, contemplating the possibility of establishing direct sales channels.

Trade relations between Venezuela, an OPEC producer, and India, the second-largest buyer of its oil, rekindled following the temporary easing of US sanctions that prohibited Venezuelan oil shipments in October. This relaxation triggered a surge in spot sales of petroleum and fuel to China through intermediaries and dealers. However, the erratic nature of Venezuela’s oil output has posed constraints on its export capabilities.

Venezuelan crude last found its way into Indian shores in 2020. The renewed access to Venezuelan heavy oil could potentially assist India, a prominent consumer of Russian oil, in diversifying its sources and decreasing reliance on the Middle East.

Three Indian refiners have recently executed purchases of approximately 4 million barrels of Venezuelan crude for February delivery. These transactions occurred at a notable discount, ranging between $7.50 to $8 per barrel less than the dated Brent benchmark, using the supplied ex-ship basis. Notably, Vitol, a prominent trading house, orchestrated the sale of 500,000 barrels to HPCL-Mittal Energy (HMEL) and 1.5 million barrels to Indian Oil Corp.

Reports suggest that Reliance received an offer for a prompt shipment at a substantial discount under the dated Brent benchmark. However, the confirmation of this transaction remains unclear at this juncture.

Venezuela, presently producing approximately 850,000 barrels of petroleum per day, aims to reach the milestone of 1 million barrels per day in the near future. Reliance, a crucial customer for PDVSA in the past, has historically played a substantial role as both a crude customer and a significant fuel provider to Venezuela.

Scheduled discussions between Reliance and PDVSA officials in Caracas are anticipated to cover various aspects, including crude sales to India and potential fuel imports for Venezuela. Despite attempts to seek comments from PDVSA, Indian Oil Corp, Reliance, Vitol, and HPCL-Mittal Energy, responses were not immediately forthcoming.

While no cargoes have arrived in India to date, vessels completed loading in late November and are expected to set sail in December, according to tanker monitoring data and shipping schedules. The successful arrival of these cargoes hinges on the ability of purchasers to charter willing tankers for loading at Venezuelan ports, navigating prevalent bottlenecks and quality challenges, coupled with a readiness to meet PDVSA’s requirement of upfront payment. Some buyers have voiced concerns over PDVSA’s engagement with trading houses and intermediaries for oil sales to Asian refiners, leading to delays in fresh orders, particularly from China’s independent refiners, owing to pricing disagreements.

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