Chinese independent oil refineries will begin actively seeking alternative sources of raw materials in the coming months, with Iranian oil playing a key role. This move is prompted by the cessation of supplies from Venezuela following political changes in the Latin American country.
This is reported by Finway
Reasons for Changing Logistics and Market Implications
After the removal of Venezuelan President Nicolás Maduro by American military forces, Caracas and Washington agreed on the export of Venezuelan oil to the U.S. worth up to $2 billion. President Donald Trump noted that this agreement allows for the reorientation of supplies that previously went to China and will help Venezuela avoid further production cuts.
The reorientation of exports may lead to a shortage of heavy Venezuelan oil for Chinese independent refineries, which traditionally purchased this raw material at a significant discount. According to traders’ estimates, China remains the largest oil importer, buying discounted products under sanctions from Russia, Iran, and Venezuela.
“The events in Venezuela have hit independent Chinese refineries the hardest, as they risk losing heavy oil at a discount,” said Sparta Commodities analyst Jun Go.
Forecasts for New Supply Sources for China
Currently, the stockpiles of Venezuelan oil on tankers in Asia can cover approximately 75 days of demand from China. This gives the country some leeway to find new suppliers. Experts predict that by March-April, Chinese refineries will start to pivot towards purchases from Iran and Russia, and may also increase imports from countries not under sanctions, such as Canada, Brazil, Iraq, and Colombia.
The agreement between Venezuela and the U.S. also served as a signal that the Venezuelan authorities are complying with Trump’s demands to grant American oil companies access to the country’s resources under the threat of new military intervention.