China's teapot refiners are buying discounted Iranian crude to replace the loss of supplies from Venezuela following Washington's violent takeover of the South American nation's oil, Reuters reported Monday.
"The drawdown of Iranian oil held in storage is making up for the drop in Venezuelan supply to the world's largest crude importer," the news agency wrote, citing two people with knowledge of the matter.
Venezuelan oil shipments to China have fallen drastically since US President Donald Trump imposed a blockade on Venezuelan oil tankers attempting to leave the country in December.
On January 3rd, US forces bombed the Venezuelan capital, abducted Venezuelan President Nicholas Maduro, and took control of the country's oil. Washington announced it was placing Venezuela's oil revenues in accounts in Qatar under White House control.
Trump has allowed global trading firms Vitol and Trafigura to sell up to 50 million barrels of Venezuelan oil. However, Beijing-owned firm PetroChina has halted its oil purchases from Caracas amid the uncertainty.
Beijing's independent refiners have responded by stepping up purchases of Iranian heavy crude stored in bonded storage tanks in China and on ships at steep discounts, the sources told Reuters.
Additional Chinese purchases of Iranian Heavy and Pars crude grades are expected in February and March, one of the two sources added. The refiners can purchase Iranian Heavy crude at discounts of about $12 per barrel, as Iran is faced with few willing buyers due to US sanctions.
Russian Urals trade at a discount of $11 to $12 per barrel, also due to US sanctions. With Washington's permission, Vitol is offering Chinese buyers discounts of roughly $5 per barrel for Venezuelan crude.
China's imports of Venezuelan crude averaged 394,000 barrels per day (bpd), around four percent of Beijing's total seaborne crude imports, before the US takeover.
On Saturday, Trump said India will begin buying Venezuelan oil, helping to replace the loss of Russian supplies amid US tariff threats. “We've already made that deal, the concept of the deal,” Trump told reporters while traveling aboard Air Force One.
Last year, after Trump imposed a 25 percent tariff on countries buying Venezuelan oil, New Delhi stopped buying oil from Caracas. India and China have been forced to shift their purchases of oil in recent years due to aggressive sanctions on Russia, Venezuela, and Iran.