Indian refiners exploited the US sanctions waiver on Venezuela to import more than 1,75,000 barrels per day (b/d) crude oil from the South American country making it the fifth largest supplier in February.

Trade sources and refiners said that imports are continuing at a “health pace” during March, but at lower levels compared to last month. After the US lifted sanctions on Venezuela for six months—beginning October 18, 2023—India has been procuring cargoes from December 2023, after a hiatus of over three years, emerging as the largest buyer of crude oil in January 2024 from the country with the world’s largest proven oil reserves.

As per energy intelligence firm Kpler, the world’s third largest importer secured more than 2,54,000 b/d in January and over 1,91,000 b/d in December 2023 from Venezuela. Until 2019, India was Venezuela’s third largest purchaser, after the US and China, importing roughly 3,00,000 b/d on an average.

Securing cargoes

Viktor Katona, Kpler’s Lead Crude Analyst told businessline that Indian refiners exploited the US sanctions waiver in less than a month after the lifting of sanctions. India’s refining system is one of the most sophisticated in the world, so the likes of Reliance Industries (RIL) or Indian Oil Corporation (IoC) would actually want to buy heavier grades, even with higher levels of sulphur, because they can convert residue into diesel and gasoline, the high-value products, he explained.

Even though RIL took the lead in February, importing two very large crude carriers (VLCCs), IoC and HPCL-Mittal Energy (HMEL) also participated sharing one VLCC tanker worth of cargo. RIL bought its first cargo that was already loaded in early December 2023 (aboard M/T Gustavia S).

When asked about the scenario in March, Katona said, “After Indian buyers received three cargoes in February, March should see the arrival of three new cargoes again (of this, two have already discharged to Jamnagar - Nissos Kea and Eurohope), whilst one Phoenix Vigor is en route and should start discharging March 31. So after a three-year high of 1,75,000 b/d in February, March should see a marginal decline to 1,55,000 b/d.”

Back in the day when Venezuelan grades were off market and only Chinese buyers were in, a cargo of Merey would be priced around $20 a barrel to Brent, however, by now, with Venezuelan crude trading freely, a cargo of Merey would be discounted only to $8 to Brent. So the sanctions waiver also lifted Venezuelan prices massively, he added.

Reimposing sanctions

However, the threat of reimposition of sanctions by the US, after April 18, due to no visible progress between Venezuela’s President Nicholas Maduro and Unitary Platform, particularly on allowing all presidential candidates to compete in the election, has threatened to impact the trade. But, an official with a domestic refiner said that so far imports are continuing and even if sanctions are imposed, the impact on imports would ‘not be substantial’.

Last month, ICRA Senior VP & Co-Group Head Corporate Ratings Prashant Vasisht said that Venezuela accounts for only about 4-5 per cent of India’s overall imports, besides which the discount available is low on a landed basis. Accordingly, even if sanctions are reimposed by the US, Indian refiners can easily shift to West Asian alternatives.

Katona said that “interestingly enough” the market expectation was that India would wind down purchases of Venezuelan cargoes with the looming deadline by which the White House would need to decide if it extends the sanctions waiver for another six months or goes for a sanction snapback.

“However, there have been two cargoes in March already that loaded Venezuelan Merey and are heading towards India, one towards Jamnagar, the other towards Paradip, the tankers are Caspar and Nissos Tinos, respectively. Both will arrive around April 24-25, so one week after the potential sanctions snapback date. This underscores the belief that Indian refiners have in the sanctions being extended,” he opined.

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