The United States has relaxed sanctions on Venezuela’s oil sector, authorising oil exports without limitation for six months, paving the way for India, particularly private sector giants Reliance Industries (RIL) and Nayara Energy (NEL), to resume crude oil imports after a three-year hiatus.
Prior to the sanctions, India, through RIL and NEL, was a regular purchaser of Venezuelan crude. The most recent import before the sanctions was recorded in November 2020, but with Washington easing restrictions on Venezuela's oil sector in October this year, there's a renewed opportunity for oil exports. Venezuela being an OPEC member, holds the world's largest proven oil reserves.
Last month, India's Petroleum Minister mentioned the country's interest in buying discounted Venezuelan oil. As the third-largest global consumer of crude oil, India depends on imports for over 85% of its needs. The government aims to secure cost-effective oil from any available source, considering the volatile oil markets. While Venezuela offered substantial discounts to Chinese refiners during sanctions, recent reports suggest these discounts have diminished due to eased sanctions and increased demand from other buyers.
In December and January, Reliance Industries (RIL) booked three tankers each capable of holding up to 270,000 tonnes of crude oil, according to shipping fixtures, to load oil from Venezuela, signalling a revival in trade that ceased when US sanctions were imposed on Caracas in 2019.
Reliance Industries Ltd, a private refiner, has secured the charter for two supertankers, C. Earnest and C. Genuine, set to load crude shipments from Venezuela between December and early January. Another arrangement involves the Very Large Crude Carrier Eucaly, chartered for transporting Venezuelan crude to India in early December, also for Reliance. Together, these three tankers have a potential capacity of carrying up to 6 million barrels of crude.
Alarming for Chinese buyers?
The restart of India's oil imports from Venezuela is causing concerns for Chinese refiners, impacting their import activities. Reliance Industries (RIL) entering the Venezuelan market is a significant shift, reducing the dominance of Chinese buyers over Venezuelan oil flows.
Before the sanctions were lifted, China was the primary purchaser of most cargoes. RIL is expected to be the main Indian buyer, with Nayara Energy (NEL) potentially maintaining its focus on discounted Russian crude. India, as the world's third-largest oil importer, was a major buyer of Venezuelan crude before US sanctions redirected its refiners to Chinese competitors in 2021.
The temporary rollback of US sanctions in October has triggered anticipation of a revival in Indian purchases. This renewed demand from India is unwelcome news for Chinese refiners, leading to narrowed discounts offered to China in recent weeks. Most Private refiners in China's Shandong province, traditionally strong consumers of Venezuelan oil, have been inactive since the second half of October.
Kpler's data indicates that India averaged around 10 million barrels per month in imports from Venezuela before sanctions, with Reliance alone purchasing an average of five supertankers monthly from the Latin American producer in 2018-2019.
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