Venezuela up until now was one of the leading global suppliers of heavy crude oil, keeping the coffers of President Nicolas Maduro flush with cash. With some of the richest deposits of oil in the world, it should be no surprise that one of the founding members of OPEC gets the vast majority of its revenue from oil sales. US sanctions in place since January 2019 have changed that, though a year later and Maduro’s grip on power remains stable, despite the continued international support for opposition leader Juan Guaido. While sanctions have had little political impact, they have dealt a blow to the Venezuelan economy and changed the way it conducts its oil business.
After sanctions were imposed, US imports of Venezuelan crude dropped dramatically in the months following and halted by mid-year. With the US market out of reach, India became the largest importer of Venezuela oil with 309,000 barrels per day last year, followed by China with 209,000 bpd.
Nonetheless, we have still seen flows headed to Europe last year, with Sweden, Spain and Italy among the top customers. While the Swedish flows can be explained away by the Nynas Petroleum joint venture with Neste Oil, the flows to Spain and Italy appear to have been swap deals for products with companies such as Repsol. Throughout 2019, Spain received 29,000 bpd of Venezuelan oil, while Venezuela imported some 12,000 bpd of refined products coming from Spain.
To evade sanctions, vessels carrying Venezuelan crude started using Iran-like tactics to mask or hide shipments last year. This was especially the case toward the end of the year, when we saw an increasing number of ships switching off their AIS signal either before or after loading in Venezuela.
We recently observed vessels loaded with Venezuelan crude conducting ship-to-ship transfers in countries like Malaysia and Togo, uncommon in the pre-sanctions era. We also saw a larger number of ship-to-ship transfers offshore Malta and Gibraltar for voyages that ended at Venezuelan ports. We expect this vessel activity to continue so long as Caracas is under US sanctions pressure.