Russian oil companies began supplying Urals oil to Venezuela

According to Kommersant, Russian oil companies have begun supplying oil to Venezuela, against whose oil sector the United States relaxed sanctions until April. The risk of falling under restrictions again encourages Venezuela to increase its own oil exports, which exceeded 650 thousand barrels per day (b/d) in February. Therefore, the country decided to purchase Russian oil for its own processing.

The Ligera supertanker with 1.8 million barrels of oil of Russian origin is preparing to ship Urals crude to Venezuela, Kpler told Kommersant. The ship is located near the local port of Jose. Ligera received oil through STS transshipment (ship-to-ship, side to side) from the tankers Nautilus and Julia A, which left the ports of Novorossiysk and Ust-Luga with Urals cargo. The cargoes belonged to Rosneft and Surgutneftegaz, respectively. In February, the Russian Federation supplied Venezuela with a shipment of 260 thousand barrels of diesel fuel produced by TAIF.

The supply of Russian oil and petroleum products to Venezuela is an exceptional case. Venezuela mainly uses its own heavy oil for processing, mixing it with naphtha or gas condensate to obtain raw materials of the appropriate quality. During 2022-2023, the country also resorted to purchasing oil from Iran, which became the largest supplier to the country. But the volumes of such transactions were small. In March 2023, they reached a maximum of 89 thousand b/d, and from July of the same year they stopped altogether.

Venezuela has been under pressure from US sanctions since 2019, including banning oil trade with state-owned PDVSA. The country was forced to sharply reduce its oil exports and lose even more revenue. From year to year, the country also reduced production as a result of the economic crisis and the lack of new investments in the industry. Now Venezuela produces approximately 800 thousand b/d, more than 1.6 times less than in 2018. In October 2023, the United States relaxed sanctions against the Venezuelan oil sector for six months. As a result, in February, according to Kpler, Venezuelan oil exports reached a four-year high of 660 thousand b/d, about a third of this volume was purchased by the United States. The decision to ease sanctions occurred at the same time that the price of oil exceeded $100 per barrel in September 2023, as Russia and Saudi Arabia voluntarily reduced exports. The easing of sanctions was intended to support the cost of raw materials, which have since dropped by 20%.

The Russian oil industry has also been under EU and US sanctions since February 2022 following the outbreak of hostilities in Ukraine. Due to sanctions, the Russian Federation was forced to redirect oil flows that previously went to Europe, mainly to Asian markets.

Venezuela will be the focus of oil markets over the next month as the Biden administration faces the tough decision of whether to extend its six-month sanctions relief, according to Kpler’s Victor Katona. At the same time, PDVSA is seeking to squeeze the most out of its own oil exports, which is why exports rose to a four-year high in February. As the analyst notes, PDVSA now receives hard currency for oil sales, which is a much preferable option than previous oil-for-debt deals with mainly Chinese companies. “Urals in this coordinate system plays the role of a substitute for Venezuelan oil. Urals is easier to process than any grade of its own oil, and given the revenue that has emerged, PDVSA can purchase it,” says Mr. Katona. The situation is similar with the supply of Russian diesel fuel, which is intended for the domestic market, he continues: PDVSA, taking advantage of the situation, sends all the oil for export, replacing it with petroleum products from “friendly countries.”

Dmitry Kozlov