VENEZUELAN OIL, MASKED AS MALAYSIAN, SWAMPS CHINESE PORTS

Traders are racing to deliver record volumes of Venezuelan crude oil masked as Malaysian bitumen blend to China, ahead of new fuel taxes that look set to upend the lucrative flow of sanctioned oil to the world’s top crude importer, Chen Aizhu, Mei Mei Chu and Marianna Parraga reported for Reuters.

China has over the past 12 months bought an estimated $3.5 billion worth of Venezuelan oil relabeled as Malaysian fuel, according to cargo tracking and industry sources, throwing Caracas a vital lifeline while it grapples with a collapsing economy amid tough US sanctions.

Much of it has come in as bitumen blend, a mix of tar-like heavy crudes and refinery residue fuels that doesn't attract consumption tax like fuel oil and also isn't subject to China's quotas on oil imports.

Bitumen blend shipments to China have jumped 13-fold since May 2020 with cargo-tracking specialist Vortexa Analytics estimating that 90% of the cargoes over the past year to end-April were actually heavy oil from Venezuela.

That's some 324,000 barrels per day (bpd), or nearly 61% of Venezuela's total oil exports.

New fuel taxes that kick in on June 12, however, will increase the cost of bitumen blend to importers by 40% to 50%, making it uneconomic and choking off flows.

"While not all of the 350,000 to 400,000 bpd of the additional bitumen flowing into China will disappear overnight, a large proportion of it will be at risk," said Liu Yuntao, China analyst at consultancy Energy Aspects.

Chinese customs declined to comment. China's foreign ministry and Malaysia's trade ministry did not respond to requests for comment. Venezuela's oil ministry and state oil company PDVSA did not immediately respond to requests for comment.

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