US refiners offset Venezuela, Mexico losses with new oil sources
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US Gulf Coast refiners ramp up Middle Eastern and South American crude imports to balance losses due to Venezuelan sanctions and declining Mexican supply.
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The sun set behind LyondellBasell oil refinery on Sunday, July 20, 2025, in Houston (AP)
US Gulf Coast refiners are increasing their purchases of Middle Eastern and South American crudes to compensate for the reduced availability of Venezuelan and Mexican barrels, as indicated by ship tracking data. This comes as a temporary fix that could become unnecessary if the US government decides to permit the reintroduction of certain sanctioned Venezuelan crude into the market.
The shift in trade flows highlights a deficit of medium and heavy crude grades at the crucial Gulf Coast refining hub, which has faced difficulties in recent months in obtaining sufficient supplies due to production and quality issues in Mexico, combined with the US government's continued sanctions pressure on Venezuela's energy sector.
In March, the US Treasury Department withdrew critical licenses that had permitted certain companies to ship Venezuelan oil and fuel to the US, following criticism from then-President Donald Trump regarding the OPEC nation's handling of migration and democratic governance.
According to Reuters, however, the US administration is now moving toward issuing new authorizations to select partners of Venezuela’s state-run PDVSA that would allow them to conduct restricted operations, potentially including oil swaps, according to five sources familiar with the matter who spoke this week.
Before the license revocation, US imports of Venezuelan crude averaged 175,000 bpd this year, representing roughly 16% of Gulf Coast oil imports, according to Kpler data. Mexican Maya crude imports have dropped to 172,000 bpd in July, a record low, as declining production and quality issues reduce demand for the heavy grade.
Colombia, Brazil, Guyana become refinery solace
To offset the reduced Venezuelan and Mexican supplies, Gulf Coast refiners are turning to alternative South American sources like Colombia, Brazil, and Guyana, with July imports hitting a five-year high, as Colombian heavy crudes such as Castilla and Vasconia more than doubled to 225,000 bpd this month, reaching their highest monthly volume in three years.
During this period, refiners also increased purchases of medium-sulfur Guyanese crudes like Unity Gold and Payara Gold to approximately 95,000 bpd, while Brazilian heavy sour grades such as Peregrino saw a 58% surge to 57,000 bpd.
Middle Eastern crude shipments to the Gulf Coast, primarily consisting of Iraqi Qaiyarah, Kuwaiti Eocene, and Saudi Arab Light medium sour grades, have surged this month to 212,000 bpd, reaching their highest level since January.
While most US crude production consists of light, low-sulfur oil that doesn't optimally suit Gulf Coast refineries designed for heavier feedstocks, transitioning to significantly different crude grades presents operational difficulties that can constrain output and compress profit margins.
If US-authorized oil swaps allow sanctioned Venezuelan crude to reenter the market, Gulf Coast refiners could shift back to their favored heavy grades that typically boost their profitability.
