Chinese state-owned oil company PetroChina told its partners not to buy or trade Venezuelan crude oil ever since the U.S. took control of Venezuelan oil exports earlier this month, according to a report published by Reuters on Tuesday.
Reuters, citing two “trading executives familiar with the situation,” indicated that PetroChina’s decision is evidence that Venezuelan oil supply to China will remain “tight” and push Chinese buyers towards Canadian, Iranian, or Russian oil instead.
PetroChina is a publicly listed subsidiary of China’s National Petroleum Corporation (CNPC). The unnamed traders spoke with the outlet on condition of anonymity “because the matter is sensitive.” Reuters pointed out that CNPC was the largest single buyer of Venezuelan oil until 2019, when President Donald Trump, during his first term, imposed sanctions on Venezuela’s state-owned oil company PDVSA in response to the extensive list of human rights violations committed by the Venezuelan socialist regime regime against its own people.
President Trump announced this month that the Venezuelan socialist regime, now led by “acting president” Delcy Rodríguez, would begin cooperating with the United States to help boost its oil output and sell its oil in U.S. markets, in addition to allowing U.S. oil companies operate in Venezuela. Rodríguez is nominally leading the country following the January 3 U.S. law enforcement operation in Caracas that resulted in the capture of dictator Nicolás Maduro and his wife Cilia Flores.
Prior to the January 3 operation, the Venezuelan regime had been selling its sanctioned oil to China for heavily discounted prices. For years, the Venezuelan regime exported much of its China-bound oil as part of an oil-for-loan debt program. China also played a key role in helping Venezuela evadevU.S. oil sanctions. The Venezuelan socialists have failed to publicly disclose data on what it owes to China, with Bloomberg estimating this month that the debt ranged from anywhere between $10 to $20 billion. Reuters, on the other hand, estimated the debt at around $60 billion. Following the downfall of Nicolás Maduro, China is reportedly pressuring the Venezuelan regime to pay Venezuela’s debts.
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On Thursday, Reuters, citing an unnamed U.S. official, indicated in another report that the Trump administration would be allowing China to purchase Venezuelan oil but at regular international prices and not the “unfair, undercut” rates that the Venezuelan regime had been selling it to China before Maduro was captured.
“Thanks to President Trump’s decisive and successful law enforcement operation, the people of Venezuela will collect a fair price for their oil from China and other nations rather than a corrupt, cheap price,” the unnamed official told Reuters.
One of the unnamed trading executives cited by Reuters on Tuesday detailed that PetroChina traders “were told not to touch the oil until further notice from headquarters.” The second executive asserted to the outlet that in addition to concerns over U.S. control of Venezuelan oil, offers from traders are not as “competitive” with other types of crude oil such as Canada’s. Discount margins for Chinese-bound shipments of Merey, the Venezuelan crude-oil blend, narrowed by about $10 a barrel since December.
Reuters, citing trade sources, detailed that oil trader Vitol has offered Venezuelan oil to Chinese buyers at a discount of $5 per barrel to ICE Brent for April delivery, down from the $15 a barrel discount offered in December before President Trump ordered a complete blockade of sanctioned oil tankers entering or leaving Venezuela.
Traders and analysts are reportedly expecting that Chinese crude imports from Venezuela “slump” starting on February after the U.S. took control of Venezuelan oil exports, resulting in fewer tankers leaving towards China.
Last week, President Trump told reporters aboard Air Force One on his way back from the World Economic Forum (WEF) in Davos, Switzerland, that U.S. companies would begin drilling Venezuelan oil “very soon.”
“We’re going to start drilling very soon. We have the biggest companies in the world. We have them, and they’re going to be going in, they’re all negotiating right now,” President Trump said. “And we’re representing the nation, and the nation is very thrilled by that because we’re really good at this.
“And they’ll be taking in more money than they ever have. But we’ll be taking in a lot of money, too,” he continued, and added that this would result in the U.S. and Venezuela making “a lot of money” while further bringing oil prices down in America.
Christian K. Caruzo is a Venezuelan writer and documents life under socialism. You can follow him on Twitter here.
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