Venezuela Resumes Major Crude Oil Shipments to India After US Sanctions Ease
In a significant development for global energy markets, Venezuelan crude oil is flowing to India once again. Trading firms and purchasers have initiated the hiring of very large crude carriers to transport oil from the South American nation. This marks the first such movement since a supply arrangement between Caracas and Washington took effect, with expectations of increased shipments to India, as reported by Reuters.
Historical Context and Export Surge
Prior to the imposition of US sanctions in 2019, India held the position as the third-largest importer of Venezuelan crude. Following the lifting of these restrictions, Venezuela's oil exports surged to approximately 800,000 barrels per day in January, up from around 500,000 barrels per day in December. This rebound highlights the country's efforts to revitalize its oil industry amid changing geopolitical dynamics.
Shift in Shipping Strategies
Since January, most Venezuelan crude exports have relied on medium-sized tankers, such as Panamax and Aframax vessels, which typically carry between 450,000 and 700,000 barrels of heavy crude. These shipments have largely been destined for US refineries. Additionally, some cargoes have been moved on Suezmax tankers, capable of transporting up to 1 million barrels, to storage terminals in the Caribbean. From there, traders have forwarded the oil to ports in the United States and Europe, according to vessel movement records.
Advantages of Very Large Crude Carriers
The deployment of very large crude carriers, each with a capacity of up to 2 million barrels, is poised to bring multiple benefits. These massive vessels are likely to reduce freight costs for traders and buyers, alleviate the shortage of smaller tankers, and accelerate deliveries starting next month. Faster shipments could also help draw down the substantial volumes of crude currently stored in Venezuela, optimizing inventory management.
Specific Shipments and Key Players
At least three very large crude carriers, chartered by major trading firms Vitol and Trafigura, have been allocated loading schedules for March at Jose, Venezuela's primary crude export terminal. Operated by state energy company PDVSA, this facility handles as much as 70% of the country's oil exports. Sources indicate that these cargoes are expected to head to India. In another development, the supertanker Olympic Lion has indicated Venezuela as its destination this week, with an estimated arrival in late March, based on LSEG ship-tracking data.
Economic Implications and Market Dynamics
Transporting crude in larger volumes could enable trading firms to lower expenses. This is particularly relevant as the approximately $15-per-barrel discount to Brent, agreed upon last month for early purchases of Venezuela's Merey heavy crude, has become less appealing. This shift is partly due to the backward-dated structure of the market, where cargoes scheduled for later delivery are priced lower than those available for immediate shipment.
Notable Deals and Direct Sourcing
According to shipping records and sources, US oil company Chevron has sold a cargo of Venezuelan Boscan crude to Reliance Industries, marking the first such sale since December 2023. The shipment is set to be transported aboard the vessel Ottoman Sincerity, representing the initial sale of this heavy crude grade in nearly six years. Additionally, Reliance has purchased a 2-million-barrel cargo from Vitol for loading in March and is exploring the possibility of sourcing crude directly from PDVSA.
Strategic Moves by Trading Firms and Refiners
Trading companies Vitol and Trafigura have been exporting Venezuelan crude this year under a $2-billion agreement between the United States and Venezuela. They have recently sold heavy Venezuelan crude cargoes to Indian refiners, including Indian Oil Corp, Bharat Petroleum Corp, and HPCL Mittal Energy. This aligns with India's strategy to reduce its dependence on Russian oil. Meanwhile, Chevron and several US-based refiners, such as Valero Energy, Phillips 66, and Citgo Petroleum, are preparing to increase the volume of Venezuelan crude processed at their facilities, a move expected to support higher export levels.
Chartering Agreements and Exclusive Use
Sources reveal that Chevron and some US refiners have chartered dozens of Aframax and Panamax tankers, primarily through time-charter arrangements tied to Venezuela. These agreements ensure that the vessels will be used exclusively to transport Venezuelan crude during the contract period, streamlining logistics and enhancing efficiency in the supply chain.
