No. of Recommendations: 11
Not really.
China's nuts: meet US rope.Yes, really. The oil is being marketed to Chinese refiners for March delivery. Heck, they're aiming to sell it to the
state oil refiner, not even the independent ones:
Vitol and Trafigura have also approached PetroChina, exploring interest from the Chinese state refiner which was a major buyer of Venezuela's heavy sour Merey crude as well as fuel oil before U.S. sanctions started, three sources said.
"The traders may first tap the big state oil traders rather than teapots," one of them said, referring to independent refiners in China which typically buy cheap sanctioned oil.
PetroChina did not immediately respond to a request for comment.https://www.reuters.com/business/energy/vitol-traf...Which, again, makes sense. We have to sell the oil. It's heavy oil, so only a subset of refineries can handle it. The Chinese have heavy refineries that were planning on receiving this oil. All the other refineries that deal with heavy oil have already made arrangements about where to get their oil. If you want to sell the oil in the near-term, and possibly intermediate-term, your primary options are the countries that were planning on buying it anyway. Which means you're selling to China.
The realities of markets, contracts, and physical refinery capabilities can't simply be wished away with a "nuts, rope" metaphor. Venezuela's got a few hundred thousand barrels per day of heavy crude it has to sell. It has to land somewhere, and there don't seem to be enough "somewheres" outside of China that have enough spare refining capacity to take it on. So, we'll be selling to China.
