Russia and Iran could see higher revenues from oil as sellers raise prices to China as a result of competition from temporary easing of sanctions on Venezuelan oil, Reuters reports.

With the temporary lifting of U.S. sanctions on Venezuela, which remain in question amid intensifying efforts to annex oil-rich Essequibo from Guyana, Venezuela oil prices have risen, creating more competition in the market.

At the same time, Chinese teapot refineries, which are large buyers of discounted, sanctioned Russian and Iranian crude, are seeing higher offer prices, which could lead to greater revenues for Moscow and Tehran in 2024.

With Venezuelan oil now fetching a higher price, Chinese refineries are dipping more heavily into Russian and Iranian crude, which should pick up pace in the beginning of the New Year when demand from these refineries is expected to rebound, according to Reuters.

Citing Chinese trading sources, Reuters reports that there has so far only been a single deal for Venezuelan crude for January.

Venezuela discounts are now at about $11 per barrel against Brent crude (delivered basis), while the U.S. sanctions regime had seen the discount as high as $20 per barrel against Brent.

A Russian oil trader told Reuters that Chinese demand is making a comeback and teapots are “actively” seeking Russian blends, both ESPO and Urals. Iranian oil demand is also rebounding, with discounts falling from around $13 per barrel against Brent in early October to around a $6-per-barrel discount now.

A renewal of U.S. sanctions on Venezuela could, however, rearrange this discount setup.

The easing of sanctions on Venezuela was a temporary gambit, which Washington conditioned on the holding of free and fair elections in 2024. To that end, an opposition candidate was chosen to stand in the election against President Nicolas Maduro. However, since then, Maduro has orchestrated a referendum on annexing Essequibo from Guyana–where Exxon has made a string of huge offshore discoveries–and several opposition figures have been arrested for treason.

Source » oilprice