Commodity traders are having the rug pulled out from under one of their biggest paydays yet as refiners start bypassing oil and traders and buying Venezuelan crude directly, according to Reuters. Refiners and major oil-producing firms are rapidly gaining market share in Venezuelan crude by locking in direct supply contracts with state-run Petróleos de Venezuela, S.A. (PDVSA), bypassing the global middlemen and commodity trading houses such as Trafigura and Vitol that previously dominated the space.
Six months after traders reopened Venezuela’s oil market, Phillips 66 (NYSE:PSX) and India’s Reliance Industries have already signed direct supply agreements, with Valero (NYSE:VLO) and Thailand’s Tipco expected to follow.
Previously, Vitol and Trafigura enjoyed first-mover advantage, managing to become dominant in Venezuelan crude marketing because of their exclusive U.S. government licenses, pre-existing logistical infrastructure and historical ties to PDVSA. Following major political shifts in Venezuela in January, the U.S. administration brokered a deal to manage and sell the country’s oil. The U.S. Department of the Treasury issued special, long-term licenses specifically to Vitol and Trafigura until June 2027, effectively giving the traders a temporary monopoly. The pair collectively moved more than 100 million barrels of crude over a six-month period while other global firms remained legally locked out.
Their unmatched logistics also gave them a clear upper hand. After all, global trading houses have the fleet capacity and global reach to quickly deploy tankers and reroute large volumes of crude. They could absorb massive storage and shipping costs in a difficult market, using floating storage facilities in places like Malaysia to break up bulk shipments. When the ongoing war in Iran disrupted Middle Eastern supply chains, Vitol and Trafigura quickly diverted heavy Venezuelan grades like Merey 16 to major Asian refining hubs in India, South Korea, and Malaysia at narrower discounts.
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Unfortunately for Vitol and Trafigura, that access monopoly has begun to evaporate.
PDVSA is now actively restoring its pre-2019 business model, which prioritizes direct supply contracts with refiners and joint-venture partners over intermediaries. After a seven-year hiatus, Phillips 66 has resumed purchasing spot cargoes directly from PDVSA. In July, the company was directly allocated three cargoes of Merey 16, a heavy sour crude grade that suits its U.S. Gulf Coast refining system.
By eliminating intermediaries, PDVSA is able to raise its realized price by avoiding paying reseller premiums, reshaping Gulf Coast refining economics.
Similarly, Chevron Corp.(NYSE:CVX) has significantly expanded its Venezuelan oil exports, recently hitting an average of 293,000 barrels per day (bpd) in the second quarter, up from 223,000 bpd earlier in the year. This ramp-up coincides with the company’s uptick in shipments to U.S. Gulf Coast refiners, along with its moves to secure assets and drilling deals in the Orinoco Oil Belt. Chevron and PDVSA finalized an asset swap that increased Chevron’s stake in the Petroindependencia JV to 49% and granted development rights to new areas in the Orinoco Oil Belt.
The U.S. Oil & Gas major aims to steadily expand its JV output, competing directly with global trading houses for a larger slice of Venezuela’s total crude exports, which have risen to over 1.2 million bpd. Analysts estimate that maximizing these export and production capabilities could add up to $700 million annually to Chevron’s operating cash flow, according to Bloomberg back in January.
Reliance Industries, India’s top refiner, has also begun direct purchases of Venezuelan crude to complement the volumes it previously had to source through intermediaries. Back in April, Reliance loaded a 2-million-barrel cargo of heavy Venezuelan crude directly from PDVSA, navigating terms controlled by the U.S. Treasury Department.
Meanwhile, European energy majors have followed suit: Spain’s Repsol (OTCQX:REPYY) and Italy’s Eni S.p.A. (NYSE:E) both expanded direct liftings of Venezuelan crude to supply their European refining operations. The two companies are using this to offset billions in receivables accumulated from supplying the domestic Venezuelan market with gas and diluents. Eni and Repsol co-manage the Cardón IV project and are actively pursuing agreements to sustain and expand domestic gas supply, with long-term ambitions for LNG exports.
That said, the ongoing revival of the Venezuelan oil trade has hardly been smooth-sailing, with the South American country facing a severe shortage of functional oilfield services and drilling equipment. Rystad Energy estimates that while a 17% crude production increase is technically possible by 2028, real operational limits are dictating the actual pace of recovery. Backed by U.S. regulatory clearance, Venezuela’s total oil and fuel exports climbed past 1.2 million barrels per day in mid-2026, up from an average of 847,000 bpd in 2025, and now eyeing 1.37 million bpd by the end of the year.
By Alex Kimani for Oilprice.com
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