Whalesbook
Vitol and Trafigura, two of the world's largest independent oil traders, are reportedly in discussions with refiners in India and China for Venezuelan crude oil cargoes scheduled for delivery in March. This development follows recent agreements struck between the trading firms and the U.S. government, which aim to facilitate the marketing of Venezuelan oil previously stranded by sanctions.
U.S. Government Eases Restrictions
The global commodities traders confirmed their deals with U.S. authorities to help market Venezuela's crude. This move is seen as crucial for allowing the OPEC member to resume exports, which have been effectively halted since the political upheaval surrounding President Nicolas Maduro's government. The U.S. government’s sanction relief is enabling these marketing efforts, accelerating the sale of Venezuelan oil.
Indian Refiners Enter Spotlight
Vitol has approached Indian state refiners regarding potential purchases. Sources indicate one such refiner was offered a cargo at a discount of approximately $8 to $8.50 per barrel below the ICE Brent benchmark on a delivered basis. Companies such as Indian Oil Corporation and Hindustan Petroleum Corporation have previously been reported as considering Venezuelan oil purchases. Reliance Industries has also stated it would consider resuming purchases if U.S. regulations permit sales to non-U.S. buyers.
China's PetroChina Considered
Discussions have also extended to PetroChina, the Chinese state refiner. Prior to the imposition of U.S. sanctions, PetroChina was a significant buyer of Venezuela's heavy sour Merey crude and fuel oil. Traders suggest that global traders may initially target major state-owned entities like PetroChina over smaller independent "teapot" refiners.
Logistical Preparations Underway
The trading firms are actively securing vessels to transport the oil. Trafigura's Chief Executive Officer confirmed that the company would load its first cargo for the U.S. this week. In a related logistical move, Vitol recently loaded a shipment of naphtha from the U.S. to Venezuela, essential for thinning the country's heavy crude to improve its transportability and processing capabilities. This naphtha cargo is expected to arrive in Venezuela in late January.
Market Implications
The imminent resumption of Venezuelan oil exports is expected to add supply to the global market. This potential increase is seen as counterbalancing concerns over supply disruptions from Iran, which could help cap gains in international oil futures prices.