Asian fuel oil prices surge as Venezuelan crude shifts to US

Friday 09 January 2026 - 14:20

By: Dakir Madiha

Asian fuel oil prices surge as Venezuelan crude shifts to US

Fuel oil prices in Asia have spiked to their highest levels in eight months, driven by traders' expectations of a major redirection of Venezuelan heavy crude toward American refineries. The premium on high-sulfur fuel oil (HSFO) 380-cst for the nearest month surged above $27 per barrel on January 9, more than doubling since the start of 2026 and reaching peaks not seen since May 2025, according to LSEG data. This widening spread signals growing anticipation that Venezuelan heavy oil and fuel will bypass Asia—the world's largest HSFO market in favor of US processing facilities, following President Donald Trump's declaration that Washington will seize control of Venezuela's petroleum sector.

The shift has forced independent Chinese refineries, often called "teapots," to scramble for alternative heavy crude supplies. Demand for Canadian heavy oil has jumped sharply since the seizure of Venezuelan President Nicolas Maduro over the weekend, with processors viewing Canadian grades as prime substitutes for Venezuela's Merey crude. Traders told Bloomberg that from the second quarter onward, buyers will need Canadian crude or other options, despite its higher cost of about $8 to $9 per barrel compared to Merey. Canadian oil's superior quality and faster shipping times—17 days from Vancouver to Qingdao versus 57 days from Venezuela make it particularly appealing.

Around 22 million barrels of Venezuelan oil currently floating off Malaysia and China offer a buffer of roughly two months. Chinese buyers of Venezuelan crude are also eyeing Iranian or Russian grades, though market players warn of potential major supply disruptions for Chinese teapots starting with March arrivals. This realignment threatens to squeeze the profitability of these independent refiners, who operate on thin margins and have relied on deeply discounted Venezuelan petroleum. China imported about 389,000 barrels per day of Venezuelan oil in 2025, accounting for roughly 4% of its total seaborne crude imports.

A refinery official told Argus Media that operators are preparing to cut processing volumes or schedule early maintenance if shortages worsen. The uncertainty has fueled volatility in Singapore's HSFO futures, with the January-February spread swinging between backwardation and contango this week. Trump announced on January 6 that Venezuela would hand over 30 to 50 million barrels of "sanctioned oil" to the US, a move confirmed by Secretary of State Marco Rubio, who said America would refine and market the crude. The deal could initially involve redirecting shipments originally bound for China, Venezuela's top buyer over the past decade.