Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

China Sinochem buys rare Venezuelan oil cargo after U.S. suspends sanctions - sources

Published 2023-12-19, 12:20 a/m
Updated 2023-12-19, 12:23 a/m
© Reuters. A logo of Sinochem is seen outside an office building of Sinochem in Beijing, China, February 21, 2017. REUTERS/Damir Sagolj/Files

By Chen Aizhu and Florence Tan

SINGAPORE (Reuters) - China's Sinochem Corp has bought a million barrels of Venezuelan crude oil for arrival in December, a rare purchase as the state oil and chemicals group capitalises on Washington's suspension of sanctions on the South American producer.

In mid-October, Washington suspended sanctions on Venezuela's oil and gas exports for six months, prompting a flurry of spot trades of crude and fuel through Western traders such as Trafigura and Vitol as well as middlemen.

Sinochem has agreed to buy the cargo of heavy Venezuelan Merey crude at a discount of $11 a barrel to dated Brent crude on a delivered ex-ship (DES) basis, three traders with knowledge of the purchase told Reuters.

The cargo is for delivery to Sinochem's Changyi refinery in the eastern province of Shandong, one of several it runs in the refining hub after a state-mandated merger with ChemChina.

"(Sinochem) barely touched Venezuelan oil before, although several of its subsidiary plants are configured to process heavy type of crude oil," said a trader familiar with its Changyi plant, speaking on condition of anonymity.

In a statement, Sinochem's press office said the company "consistently conducts its operations in strict adherence to legal and regulatory requirements" and does not comment on market speculation.

Before the sanctions easing, Chinese independent refiners were the main customers for Merey crude, taking advantage of steep discounts after previous top buyer PetroChina halted buying from Caracas since late 2019, as the state giant shielded itself from the prospect of secondary sanctions.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Sinochem has long stayed clear of dealing in sanctioned oil, fearful of any adverse impact on its broader business, said senior trading sources familiar with the group's thinking.

The $11 discount for Sinochem compares with discounts of $20 for sanctions-era Merey trades into China, reflecting tightening supplies due to stagnant domestic production in Venezuela and growing demand from India and the United States.

Under sanctions, Venezuelan crude cargoes to China were typically labelled as being from Malaysia.

Asia-bound shipments of Venezuelan crude and fuel dwindled to about 10 million barrels in November from 16.5 million barrels the previous month amid the relaxation of sanctions, which allows Venezuela to export to any market, according to PDVSA documents and LSEG tanker tracking data.

    "With the higher prices, margins are thinning for Chinese independent refiners processing Merey," said a Shandong-based refinery source. 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.