By Micah Jonah
January 8, 2026
Chinese independent refiners are set to increasingly rely on Iranian and other sanctioned crude grades as supplies from Venezuela to China tighten – following a new agreement that redirects Venezuelan oil exports to the United States, according to traders and analysts.
The expected shift follows a deal between Caracas and Washington that permits up to two billion dollars’ worth of Venezuelan crude to be shipped to the U.S.
The arrangement, announced by U.S. President Donald Trump after the capture of Venezuelan President, Nicolas Maduro over the weekend, is projected to significantly reduce Venezuelan oil flows to Asia, particularly China, which has long depended on deeply discounted barrels.
China remains the world’s largest crude oil importer, a key buyer of sanctioned oil from Russia, Iran and Venezuela. Its independent refiners, widely known as teapots, have benefited most from cheap Venezuelan heavy crude, are now considered the most exposed to the looming supply disruption.
“The Venezuela situation hits China’s independent refineries the hardest, as they may lose access to discounted heavy barrels,” said June Goh, an analyst at Sparta Commodities.
“However, with ample Russian and Iranian supply available, and some Venezuelan cargoes already on the water, we do not expect teapots to bid aggressively for unsanctioned barrels, as the economics would likely not make sense.”
Data from Kpler show that China imported approximately 389,000 barrels per day of Venezuelan oil in 2025, accounting for about four percent of its total seaborne crude imports.
While the volume appears relatively small, the barrels were highly attractive due to the steep discounts at which they were sold.
In December, at least a dozen sanctioned vessels loaded Venezuelan crude and departed the country’s waters in early January, carrying an estimated 12 million barrels of crude and fuel.
Shipping data, however, indicate that loadings for Asia at Venezuela’s main ports have stopped since January 1.
As supply tightens, prices for Venezuelan Merey crude have firmed. Traders say discounts for prompt delivery have narrowed to about ten to eleven dollars per barrel below ICE Brent, compared with roughly fifteen dollars last month, although actual trading has slowed markedly.
Despite the tightening market, analysts say China has some breathing room. Venezuelan crude currently floating in Asia is estimated to be sufficient to cover around 75 days of Chinese demand, reducing any immediate urgency to secure alternative supplies.
Kpler senior analyst Xu Muyu said refiners that previously relied on Venezuelan oil are likely to switch to Russian and Iranian crude from March or April. China could also draw from non sanctioned sources such as Canada, Brazil, Iraq and Colombia, if necessary.
For now, market participants say Chinese buyers have yet to actively source replacements. Iranian Heavy crude remains the cheapest option, trading at a discount of about ten dollars per barrel to ICE Brent and available in ample supply.
Middle Eastern grades, including Iraqi Basrah crude, are also being considered.
Meanwhile, discounts for Canadian crudes such as Cold Lake and Access Western Blend exported via the Trans Mountain pipeline have widened by more than two dollars this week.
Traders attribute the shift to expectations of softer U.S. demand, with April delivery cargoes to China now priced at discounts of four to five dollars per barrel to ICE Brent.
Analysts say the evolving situation highlights how geopolitics and sanctions continue to redraw global energy trade routes, forcing Chinese refiners to once again adjust rapidly to a changing supply landscape.
