Venezuela Set to Become India's Third-Largest Oil Supplier as Hormuz Disruption Reshapes Flows

Venezuela Set to Become India's Third-Largest Oil Supplier as Hormuz Disruption Reshapes Flows India's crude import map is being redrawn at speed, with Venezuelan barrels arriving for the first time since April under US-brokered sales. Venezuela is on track to become the third-largest crude oil supplier to India this month, according to Kpler data cited by Indian media. India began importing Venezuelan crude in April, after the United States took control of Venezuelan oil sales following the capture of Nicolas Maduro. The volumes have scaled quickly enough to reshape India's supplier rankings in a matter of weeks.⁷ That matters because India is not adding Venezuelan barrels for fun. Asian buyers have been scrambling to find new oil and gas suppliers as the Iran war stretches on and the Strait of Hormuz remains effectively closed to much of the Gulf's export capacity. Asia, the primary purchaser of oil and gas from the Gulf, has been hit hardest by the loss of roughly one-fifth of global LNG trade and a significant share of crude transits.⁶ India's pivot has been building for years. The share of oil coming from Russia jumped from 2% before 2022 to 36% last year, saving India $13 billion on its energy bill in the first two years of the Ukraine war, according to ICRA, the ratings agency. When Western countries began boycotting Russian crude, some 2.6 million barrels a day once destined for Europe became available at a steep discount. India saw the opportunity and took it.^3,5 Russia and Brazil were already established pillars of India's diversified supply base. Venezuela is the new entrant. The speed of its ascent from zero to third-largest supplier reflects both the desperation of Hormuz-exposed buyers and the unusual mechanism through which Venezuelan crude is now reaching the market: US-controlled sales channels that did not exist six months ago.^7,6 The geopolitics are tangled. Donald Trump's visit to India loomed over discussions about Russian energy ties, with India still waiting for two of the five S-400 missile systems ordered from Moscow in 2018. The Economist reported that if America goes after India's Russian oil trade, China stands to benefit, as discounted barrels would simply reroute eastward rather than disappear from the market.^3,5 Russian oil production averaged 9.6 million barrels a day in 2023, a slight decrease of 0.2 mb/d compared to 2022, according to World Bank data. OPEC+ voluntary cuts totalling 2.2 mb/d were extended in late 2023, including an increased Russian cut of 0.5 mb/d. The alliance held 5.1 mb/d of spare capacity as of November 2023, about 5% of global demand. Those spare barrels sit in the background of every conversation about supply adequacy.² Japan's experience offers a contrast. Japanese refiners have imported approximately 95% of their oil from the Middle East in recent years, with over 90% transiting the Strait of Hormuz. Idemitsu purchased a cargo of Russian crude from Sakhalin as part of a diversification push, but Japan's exposure remains overwhelmingly concentrated on the very route that India has been steadily hedging against.⁴ Russia's broader energy export picture has shifted dramatically. EU natural gas imports from Russia fell by more than two-thirds from 14.7 billion cubic feet per day in 2020. Europe's share of Russian coal exports dropped from 32% in 2020 to just 13% by 2024, with almost all remaining volumes going to Turkey. Russia's coal exports to India nearly tripled over the same period, from 9.1 million short tons to 24.8 million. The energy relationship between Moscow and New Delhi keeps deepening across commodities.¹ India's three-pronged supply strategy carries its own risks. Russian crude faces the persistent threat of secondary sanctions. Brazilian volumes depend on Petrobras maintaining output from ageing pre-salt fields. Venezuelan supply runs through a US-controlled apparatus that could be disrupted by any shift in Washington's policy toward Caracas.^7,5 The thing to watch is whether India's Venezuelan imports sustain at current levels or prove to be a brief arbitrage window. If US control of Venezuelan sales tightens or redirects volumes toward domestic refiners, India's third-largest supplier could vanish as quickly as it appeared.⁷