China’s Bitumen Demand Struggles as Venezuela Faces Renewed U.S. Sanctions

Following the U.S. re-imposing oil sanctions on Venezuela on April 17, China’s independent refineries are expected to experience a higher supply of bitumen mixtures from the country. However, most industry experts believe that Venezuela’s overall exports will remain largely unaffected. Instead, the specific flow of exports, particularly to Asia, is anticipated to gradually revert to pre-October 2023 levels.

Imports of bitumen mixtures and heavy oil into Shandong Province and Tianjin City saw a significant decline in the first quarter of 2024, with a 51% drop compared to 2023, totaling 2.91 million tonnes. This reduction is attributed to a shift in exports toward the U.S. and other Asian markets, as well as sluggish domestic demand from local bitumen refineries.

Looking ahead to the second quarter, domestic demand for bitumen mixtures and heavy oil remains weak. By April 10, the average capacity utilization rate of bitumen refineries in Shandong had fallen to 27.9%, down 3.8 percentage points from March and a steep 36.5 percentage points year-on-year. This decline is closely tied to both lower feedstock arrivals and the unprofitable nature of using bitumen mixtures as a feedstock.

While the re-imposition of U.S. sanctions may lead to more Venezuelan bitumen mixtures being directed toward Asia, China’s actual consumption will still be determined by the state of domestic demand and the profitability of refineries.