India emerges as top buyer of Venezuelan crude oil in December, January

India — specifically private sector refiners RIL and Nayara Energy (NEL) — was a regular buyer of Venezuelan crude prior to imposition of US sanctions in 2019. Following the sanctions, oil imports from Venezuela stopped within a few months. As per India’s official trade data, Venezuela was New Delhi’s fifth-largest supplier of oil in 2019, providing close to 16 million tonnes of crude to Indian refiners.

In October 2023, the US eased sanctions on Venezuela’s petroleum sector, authorising oil exports without limitation for six months. Venezuela, a member of the Organization of the Petroleum Exporting Countries (OPEC), has the largest proven oil reserves in the world.

Petroleum Minister Hardeep Singh Puri has maintained for long that India is willing to buy Venezuelan oil if the economics are favourable. Given the volatility in the oil markets over the past nearly two years, the government has held the view that India will buy cheaper oil from the available sources.

India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. 

Venezuela was offering steep discounts to Chinese independent refiners, who were its biggest buyers of oil through the sanctions. Trade sources suggest that the discounts have narrowed considerably over the past few months due to the easing of sanctions and other buyers now willing to pick up Venezuelan oil. Nevertheless, even low levels of discounts can lead to massive savings for Indian refiners.

The spurt in Venezuelan oil exports to India has come largely at the expense of Chinese refiners. Venezuelan oil exports to China averaged almost 244,000 bpd between January 2021 and October 2023, as per Kpler data. With the US easing sanctions in October, Venezuelan oil dispatches to Chinese refiners have dropped to under 70,000 bpd in the following months.

Venezuelan oil dispatches to RIL in December stood at around 127,000 bpd, while nearly 37,000 bpd were dispatched to Indian Oil Corporation (IOC) and around 28,000 bpd to HPCL-Mittal Energy. January loading data shows similar volumes for RIL. The destination ports for the balance volumes headed to India — around 127,000 bpd — are not clear yet, though there are indications that a bulk of those volumes could be headed for RIL’s refineries. An RIL spokesperson did not respond to a request seeking comment on the matter.

“A total of four fully-laden very large crude carriers (VLCCs), equivalent to 255,000 bpd or half of Venezuela’s exports, sailed towards India last month, while the second-largest buyer US bought 100,000 bpd. So, India’s interest is really strong. The question is whether there would be a lull in buying before April (the month when the first six-month US sanctions waiver runs out), with Indian refiners prudently waiting for the Biden administration to extend the waivers for another six months,” said Viktor Katona, Lead Crude Analyst at Kpler.

It is not clear yet if the sanction waiver by the US will indeed be extended beyond April. The decision hinges on the understanding between the US and Venezuela over holding free and fair presidential polls in the Latin American country later this year. The US eased sanctions in October last year after Venezuela’s Nicolás Maduro government reached an understanding with the opposition for the conduct of free and fair presidential elections in the second half of 2024. The sanctions had been imposed in 2019 after Maduro retained power through an election that the US and its allies saw as unfair.

There are some worrying signs for the deal already, with the US recently threatening to re-impose the sanctions after the Venezuelan Supreme Court upheld a ban on María Corina Machado, the opposition’s unity candidate for the 2024 presidential election.