Chinese refiners expected to replace Venezuelan oil with Iranian crude
- Deal to ship Venezuela oil to U.S. set to redirect oil flows
- Venezuelan oil used by China refiners, near-term demand covered
- Chinese independents likely to tap other sanctioned oil
- Offers for Venezuelan Merey crude from Chinese buyers rise this week
Chinese independent refiners are expected to switch to heavy crude from sources including Iran in coming months to replace Venezuelan shipments halted since the U.S. removed the country's president, traders and analysts said.
Caracas and Washington agreed to export up to $2 B worth of Venezuelan crude to the United States, President Donald Trump said on Tuesday, after U.S. forces captured Venezuelan President Nicolas Maduro over the weekend.
That arrangement is likely to curtail Venezuelan supply to China, analysts say, reducing a source of cheap oil for independent refiners known as teapots. The world's biggest crude importer is a major buyer of discounted sanctioned oil from Russia, Iran and Venezuela.
Ample Russian, Iranian supply. The Venezuela drama hits China's independent refineries the hardest, as they may lose access to the discounted heavy barrels," said Sparta Commodities analyst June Goh.
"However, as there are ample Russian and Iranian feedstocks available and Venezuelan barrels on water, we do not foresee the teapots needing to bid up for unsanctioned barrels as the economics would likely not make sense for them," she said.
China imported 389,000 bpd of Venezuelan oil in 2025, about 4% of its total seaborne crude imports, Kpler data showed.
At least a dozen sanctioned vessels that loaded in December departed Venezuelan waters in early January carrying some 12 MMbbl of crude and fuel, media has reported. However, loadings for Asia at Venezuela's main ports have stopped since January 1, shipping data showed.
With supply tightening, sellers of Venezuelan Merey crude for prompt delivery offered cargoes at discounts of about $10 per barrel to ICE Brent versus $15 last month, said one trader, although trade has come to a standstill. Another trader said offers were at minus $11 per barrel.
Floating storage can last 75 days. Venezuelan crude aboard ships in Asia remains sufficient to cover roughly 75 days of Chinese demand, limiting any immediate upside for alternatives, said Kpler senior analyst Xu Muyu.
Teapots using Venezuelan oil are likely to switch to Russian and Iranian supply in March and April, and China can also tap non-sanctioned sources such as Canada, Brazil, Iraq, and Colombia, she said.
Buyers have yet to start sourcing alternatives, trade sources said, with Iranian Heavy crude priced at a discount of about $10 per barrel to ICE Brent in ample supply, the cheapest alternative.
Teapots may also consider Middle Eastern grades such as Iraqi Basrah, a Singapore-based trader said.
Meanwhile, discounts for Canadian crude such as Cold Lake and Access Western Blend exported from the Trans Mountain pipeline have widened more than $2 this week to $4–$5 a barrel to ICE Brent for April delivery to China on expectations of lower U.S. demand, traders said.
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