Chinese refiners likely to replace Venezuelan oil with Iranian crude

• Deal to ship Venezuela oil to US will redirect flows
• Venezuelan oil used by Chinese refiners
• Chinese independents may tap other sanctioned oil

Chinese independent refiners are expected to switch to heavy crude from sources including Iran in coming months to replace Venezuelan shipments halted since the US removed the country’s president, traders and analysts said.

Caracas and Washington agreed to export up to $2 billion of Venezuelan crude to the United States, President Donald Trump said on Tuesday, after US 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. China, the world’s biggest crude importer, is a major buyer of discounted sanctioned oil from Russia, Iran and Venezuela.

“The Venezuela drama hits China’s independent refineries the hardest, as they may lose access to the discounted heavy barrels,” Sparta Commodities analyst June Goh said.

“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.”

China imported 389,000 barrels per day of Venezuelan oil in 2025, about 4 percent 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 million barrels of crude and fuel, Reuters 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.

Further reading:

• For Opec, Venezuela is a strategic alarm rather than a supply shock
• Trump’s Venezuela raid will have a seismic impact
• Opec+ holds output steady despite rift among members

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 US demand, traders said.