The timeline of the latest conflict between the United States and Venezuela underscores a long term strategy focusing on securing supplies for the US Gulf Coast refineries with expectations that crude oil from Caracas will gradually flow to the US, Europe and India.
In a recent commentary, Rystad Energy Senior Vice President Commodity Markets Oil Pankaj Srivastava emphasised that the conflict highlights a long term strategy for US Gulf Coast refineries, which are configured to process heavy sour barrels and benefit from Venezuela’s ability to deliver over short lead times reducing reliance on Middle Eastern high-sulfur fuel oil (HSFO) for the US.
“Exports of Venezuela crude are expected to recover slowly toward the US, Europe and India, leaving China disadvantaged, while OPEC+ remains defensive,” he added.
Over the longer term, Srivastava explained that as Venezuelan crude oil production just exceeded 900,000 barrels per day (b/d) in 2025, with anticipated US capital inflow and a subsequent demand increase, Rystad Energy expects the Venezuelan refining sector, which has 1.2 million b/d of capacity, to start increasing runs within 18 to 24 months.
“Current run rates are hampered by frequent power disruptions, unplanned outages and improper maintenance of the refineries. We assess that the typical turn-down rate of 60 per cent should be feasible by the middle of next year,” he added.
China remains the primary loser in this evolving structure. The loss of heavily discounted Venezuelan crude undermines the economics of independent so-called ‘teapot’ refiners and places approximately $12 billion in oil-backed loans at risk.
Although some Middle Eastern HSFO and heavy barrels may now be redirected toward Asia, Chinese refiners still face higher feedstock costs, longer shipping distances and elevated geopolitical risk compared with the Venezuelan barrels they previously imported, he said.
“India, by contrast, stands out as a structural winner, with complex refineries well suited to heavy sour grades and a renewed opportunity to absorb Venezuelan crude as sanctions ease,” Srivastava noted.
US Gulf Coast refineries process nearly 1.45 million b/d of imported crude out of an average 9 million b/d in total refinery runs. With between 400,000 and 500,000 b/d of Venezuelan crude (primarily Merey) expected to be added, nearly 5 per cent of West Texas Intermediate (WTI) crude intake could be replaced by Venezuelan Merey, he anticipated.
“We used linear programing (LP) modeling (AVEVA) for some Gulf Coast refineries (having coker, catalytic cracker and hydrocracker) to estimate changes in product yields and utilisation rates of heavier oil-processing units. The results indicate an average 2 per cent increase in diesel yield, primarily higher utilisation of bottom of barrel units, driven by increased utilisation of heavy conversion units by almost 2-3 per cent,” Srivastava added.
Published on January 21, 2026