The direct impact of the event on crude oil is limited, with a bearish medium-term influence: 1. Venezuela's crude oil export volume is relatively small, approximately 700,000 to 800,000 barrels per day, with production around 1 million barrels per day. About 75% of these exports go to teapot refineries, primarily consisting of Merey heavy crude oil used as feedstock for asphalt production. The remaining 25% is exported to the United States, Cuba, and other regions. Following the Maduro incident, exports to the U.S. are expected to increase, while shipments to teapot refineries will likely decline significantly. However, based on profitability considerations, teapot refineries are unlikely to purchase compliant crude and may instead turn more to fuel oil or other sensitive crudes, resulting in limited demand for compliant oil. 2. Venezuela's crude oil exports are primarily constrained by the U.S. blockade, with approximately 24 million barrels of crude currently stored on floating storage. If the U.S. blockade is lifted following Maduro's arrest, exports could resume, but trade flows would face redirection. If the blockade continues, Venezuela might experience upstream production cuts. 3. Teapot refineries would suffer losses, while U.S. Gulf Coast refineries would benefit from increased access to heavy crude oil. The utilization rates of secondary units, such as cokers, are expected to rise, thereby boosting diesel yields. 4. Due to the heavy quality of Merey crude, which requires diluents like naphtha for transportation, a U.S.-controlled Venezuela would make it difficult for Russian and Iranian naphtha to enter the country, potentially hindering Venezuela's upstream production. 5. The medium-term goal of the Trump administration is to encourage U.S. oil companies to return to Venezuela and invest heavily in repairing its infrastructure to unlock the country's vast potential reserves. Therefore, from a medium-term perspective, this is favorable for Venezuela's production growth prospects. However, this process will take considerable time and requires the U.S. to lift sanctions and the embargo on Venezuelan crude. Once this happens, Venezuelan crude would transition from sanctioned oil to compliant oil, impacting oil prices. Overall, Venezuela's oil production and exports face short-term disruptions, but medium-term involvement by U.S. oil companies could unlock its significant production potential.
Against the backdrop of escalating tensions in Venezuela, shipments of Venezuelan crude to Asia have declined significantly. As a key feedstock for domestic asphalt production (accounting for about 40% of supply), tightening supplies of Venezuela's Merey crude have a direct bullish impact on the asphalt market. Furthermore, refineries may increase purchases of high-sulfur fuel oil to compensate for the shortage of diluted bitumen feedstock, providing an indirect boost to the fuel oil market.
Investment advisory business license: CSRC Permit [2011] No. 1289
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