Shares in major US oil refiners experienced notable gains on Monday, as the market responded to the potential implications of the Trump administration’s effort to remove Venezuelan leader Nicolás Maduro. Valero Energy Corporation (VLO), based in the Gulf Coast, led the surge with an increase of over 10%. Other key players, including Marathon Petroleum Corporation (MPC), the largest US refiner by volume, and Phillips 66 (PSX), both saw their stock prices climb about 7%.
Venezuela holds the world’s largest proved oil reserves, estimated at approximately 300 billion barrels. However, the bulk of this oil is classified as heavy, more sulfurous, or “sour” oil. This type of crude typically trades at a lower price compared to lighter, “sweeter” varieties like Brent crude or West Texas Intermediate (WTI) due to the more complex refining technology and increased capital investment required to process it.
For refineries, the prospect of accessing a significant supply of affordable heavy oil presents a lucrative opportunity. The US primarily produces light sweet oil, but its refinery infrastructure, especially along the Gulf Coast, is well-equipped to handle heavy sour oil from Venezuela, transforming it into usable products such as bitumen for road construction and industrial fuels like diesel and jet fuel.
Currently, over three-quarters of US oil exports are light sweet oil, while heavy sour oil constitutes about 60% of imports. Presently, a large share of the US’s heavy sour oil imports originates from Canada, which has extensive bitumen reserves. Though some Canadian oil reaches the Gulf Coast, the majority is relocated to the American Midwest, benefitting from reduced transportation costs.
The possibility of acquiring a consistent and inexpensive source of Venezuelan heavy sour crude—situated close to the Gulf Coast refineries—presents a lucrative scenario for companies like Valero. If US refiners gain control over Venezuelan oil, it could potentially be priced lower than current Canadian imports.
At present, roughly 80% of Venezuela’s oil is exported to China, which capitalizes on the discounted pricing tied to various risks associated with Venezuelan barrels. Although China has reportedly not purchased oil from Venezuela since early 2024, much of it still reaches Chinese “teapot” refiners through a clandestine network referred to as the “dark fleet,” which adds to transportation costs.
According to Carlos Bellorin, executive vice president of energy trends and analysis at Welligence, if the US continues its strategy to influence the Venezuelan oil market, a substantial portion of that crude would likely end up benefiting China rather than flowing to Gulf Coast refineries. As a result, China may turn to alternative suppliers, including Russian Urals-grade oil and Iran’s “Iran Heavy” oil, which are also sold at significant discounts due to geopolitical tensions.
