Venezuelan crude redirection to the US: A net positive for Crude tankers

Venezuelan crude production has declined sharply from its 2015 levels, largely due to prolonged US sanctions on crude exports and the deterioration of oil infrastructure amid years of inadequate upstream investment. While US efforts to revive production are likely to take time, any move toward full US control over Venezuelan oil assets could lead to a quick restoration of production to its recent peak of around 1 mbpd.

In 2025, the majority of Venezuelan crude exports were directed toward Asian markets, with only a limited volume flowing to the US. However, if Washington proceeds with plans to manage Venezuelan oil assets while maintaining an embargo on exports to non-approved destinations, a near-complete redirection of Venezuelan crude flows from Asia to the US cannot be ruled out.

Under such a scenario, global tonne-mile demand for crude tankers would decline materially, as long-haul shipments to Asia are replaced by shorter-haul exports to the US Gulf Coast.

However, since most Venezuelan crude exports to Asia have been conducted via the dark or grey fleet, a redirection of volumes toward the US would shift these barrels into compliant, mainstream trading channels. This transition from grey to normal trade would support utilization and earnings for the conventional crude tanker fleet.

Source: Drewry Maritime Research

At present, the bulk of US heavy crude imports, apart from the primary source, Canada, is sourced from Latin America and the Middle East. As the majority of Canadian crude supplies to the US are transported via pipelines, the scope for Venezuelan crude to replace Canadian barrels is limited. Consequently, any increase in US imports of Venezuelan crude would more likely displace supplies from other Latin American producers or the Middle East rather than Canadian volumes.

If Venezuelan crude displaces other Latin American crude in the US market, the impact on mid-size tanker demand on this route is likely to be limited, as regional trade patterns would remain broadly unchanged. However, should displaced Latin American crude be redirected to Asia to fill the supply gap left by Venezuelan barrels, this would support additional long-haul movements and boost demand for VLCCs.

Conversely, if increased Venezuelan crude exports to the US come at the expense of Middle Eastern supplies, mid-size tanker demand would benefit due to the substitution of long-haul Middle East–US voyages with shorter-haul Latin America–US trades. While VLCC demand on the Middle East–US route would likely decline under this scenario, this impact would be largely offset by stronger VLCC demand on the AG–Asia route, as Asian refiners increase imports of Middle Eastern crude to replace lost Venezuelan barrels.

However, any displacement of Canadian crude supplies to the US by Venezuelan barrels would increase global seaborne trade at the expense of pipeline flows. In such a scenario, mid-size tankers would benefit from increased short-haul shipments from Venezuela to the US. At the same time, VLCC demand would be supported by a rise in AG–Asia trade, as Asian refiners increase imports of Middle Eastern crude to compensate for reduced availability of Venezuelan barrels.

Looking further ahead, any sustained increase in Venezuelan crude production driven by improvements in oil infrastructure would likely lift Latin American crude exports to Asia, primarily displacing Middle Eastern barrels, given the region’s role as the swing supplier. Such a shift would be supportive of global tonne-mile demand and structurally positive for VLCC utilization.