Discount on Venezuelan oil to Indian refiners shrinks to lowest on record

Indian refiners see Venezuelan merey crude discounts shrink to record lows amid high freight costs and tighter supply dynamics

Indian refiners are securing some of the lowest discounts in history for purchases of dirty Venezuelan crude oil grades, Indian Customs data showed and industry officials said. Discounts on Venezuelan Merey, a heavy, high sulphur, acidic crude oil, have dipped below $10 per barrel for the first time to as low as $6.50 per barrel, one-third of what Indian refiners have secured in the past, two traders said. The discounts are calculated off benchmark ICE Brent and on a delivered basis to

Indian ports. 

Venezuelan crude oil — calculated on a unit-value basis — was offered in the decade to 2025 at rates $12-$19 per barrel, lower than the average price of the Indian Crude Oil Basket, which is a cocktail of Indian crude grades imported by India. The basket predominantly includes higher sulphur grades priced off the Dubai benchmark and some lighter, lower sulphur varieties priced off European benchmark Brent. 

Senior officials from Indian refiners told Business Standard that discounts must expand further for Venezuelan oil to be viable. They cited high transport costs and inventory losses arising from the long voyage time as risks to procurement. Another official said that if Washington allows them to procure directly from Venezuelan state-owned oil company PDVSA, they may secure better deals as intermediaries like Vitol and Trafigura are making margins on sales and on freight because they arrange the ships

for delivery.