Indian refiners are likely to import crude oil from Venezuela at a discounted rate after the US eased sanctions on oil from the Latin American country, according to a report by S&P Global Commodity Insights.
India, the world’s third biggest oil importer and consumer, reportedly ships over 80% of its oil needs from overseas and wants to cut its crude import bill.
“It is always good when more supplies come to market,” Oil Minister Hardeep Singh Puri said at an industry event, speaking about Venezuelan oil, and added: “We will buy from wherever we can get cheaper oil.”
“Coker complexes have been operating at full capacity or even overcapacity recently, primarily due to the increased processing of cheap high-sulfur Russian Urals crude. This situation has left limited room for Venezuelan grades,” said Sumit Ritolia, refinery economics analyst at S&P Global.
The report said that little change is expected in Venezuelan oil production capacity in the next six months as its state-run oil company PDVSA has “little to no investment capital and much of the oil-related infrastructure is in a poor state of repair.”
As per sources, India used to be a regular buyer of Venezuelan crude oil grades prior to the imposition of US sanctions. During the pre-sanctions period from 2017 to 2019, India imported approximately 300,000 bpd of Venezuelan crude grades, with private refiners being the key buyers. These imports represented around 5-7% of India’s total crude oil imports during that time, S&P Global data showed.
On 28 January 2019, the U.S. imposed sanctions on the Venezuelan state-owned oil and natural gas company, PDVSA, to pressure Maduro to resign during the 2019 Venezuelan presidential crisis. Earlier this month, the US eased sanctions on Venezuela after its government and opposition agreed to have next year’s election monitored by international observers. The US’ move opens up the possibility for recovery and production growth in the medium to long term, assuming the political agreements are respected, S&P Global Commodity Insights noted.
“If the refining economics would favor Venezuelan crude in the future, Indian refiners may need to displace crude from their existing sources, which might include Middle Eastern, Latin American and US crudes, ” Ritolia added.
India has diversified its oil import sources in the past few years and post-February 2022, Russia has emerged as the top seller of crude to India as it supplied oil at discounted prices amid western restrictions. The other major suppliers to India include Iraq, Saudi Arabia, the US and the UAE.
