Venezuela could displace Canadian crude re-exports

Two key buyers of Canadian heavy crude exports from the US Gulf coast are poised to increase receipts of Venezuelan crude following a temporary lifting of sanctions, which could displace Canadian supplies.

PetroChina's 400,000 b/d Jieyang refinery in south China's Guangdong province accounted for 23.1pc of Cold Lake, Access Western Blend, and Christina Dilbit exports from the US Gulf coast in January-August this year, according to analytics firm Vortexa. Repsol's 220,000 b/d Cartagena refinery in Spain accounted for 17.5pc.

Both refineries have been in discussions to increase loadings of similar-quality heavy Venezuelan crude after the US temporarily lifted some sanctions targeting the oil and gas industry for six months ending on 18 April.

PetroChina is likely to buy around 260,000-300,000 b/d of crude from Venezuela's state-owned PdV, according to traders, which could displace nearly all of the 319,000 b/d of Canadian heavy crude purchases that the Jieyang refinery averaged in the first eight months of this year.

In the past, Petrochina preferred to run Venezuelan Merey at Jieyang, but turned to Canadian heavies following US sanctions on Venezuela starting in 2019.

In Spain, Repsol is also working with PdV to increase oil and gas output at its joint ventures in Venezuela.

The easing of US sanctions is expected to "increase the availability of heavy crude for our refineries," Repsol's chief executive Josu Jon Imaz said on 26 October, though it remains unclear how much such supplies could increase. The Cartagena refinery averaged 241,000 b/d in heavy Canadian crude imports between January and August.

Repsol resumed heavy Venezuelan imports last year under an oil-for-debt deal between Respol and state-owned PdV. This year, most of Repsol's 22,000 b/d of Venezuelan imports to Spain have gone to the Cartagena refinery.

Cold Lake Houston is averaging an $8.30/bl discount to the Nymex benchmark for December trade since the 26 October start of trading, compared with an average discount of about $5.80/bl in November trade.

Sanctions relief could be short lived

Sanctions were lifted for a period of six months starting on 18 October, but they could be reimposed if Venezuela does not move toward commitments to free elections and release more political prisoners by the end of the month, a US official said earlier this week.

"We have taken a pretty big step to signal our commitment, but after 30 November, if those expectations are not fulfilled, we will have to take steps to dismantle that sanctions' relief," White House senior western hemisphere adviser Juan Gonzales said on 7 November. This could include completely reinstating sanctions or other options under discussion.

By Scott Phillips