US refiners rushed to take Venezuelan oil, but the sudden surge created an unexpected problem

A sudden influx of Venezuelan crude into the United States is creating a logistical bottleneck for Gulf Coast refiners that are unable to absorb the volumes quickly enough. The oversupply is pressuring prices and leaving some cargoes without buyers, complicating what was expected to be a swift reorientation of trade flows. The situation was detailed by Reuters.

The surge follows a $2 billion supply agreement between Washington and Caracas reached last month after the U.S. operation that led to the capture of Venezuelan President Nicolas Maduro, and comes alongside talks about a recent Washington energy policy shift that companies are already preparing for. The Trump administration moved to redirect Venezuelan oil toward the U.S. market, granting trading firms, including Vitol and Trafigura, as well as Chevron, licenses to market and sell the crude.

Export volumes rebounded sharply as a result. Venezuelan shipments climbed to nearly 800,000 barrels per day last month after collapsing in December due to a U.S. blockade, with exports to the U.S. alone nearly tripling to 284,000 barrels per day in January based on tanker tracking data.

The oil is flowing faster than refiners can handle

Traders say pricing is the primary obstacle. Venezuelan heavy crude delivered to the Gulf Coast is being offered at roughly $9.50 per barrel below Brent, but competing Canadian Western Canadian Select crude is discounted by about $10.25 per barrel. With refining margins already tight, that difference has limited appetite. This pricing pressure unfolds against broader economic strains like a reported loss of 280,000 jobs tied to trade tensions in Florida. Reaching previous capacity levels will take time as some facilities require adjustments to process heavier grades.

Capacity constraints are adding to the problem. Before sanctions were imposed in 2019, U.S. refiners absorbed about 500,000 barrels per day of Venezuelan crude, a level that will take time to reach again as some facilities require adjustments to process heavier grades. Phillips 66 CEO Mark Lashier said the company can process about 250,000 barrels per day of Venezuelan oil, but only if pricing is competitive with other heavy crudes it already runs.

Chevron is also facing constraints within its own system. The company increased exports to about 220,000 barrels per day in January, but CEO Mike Wirth said its refining network can handle only around 150,000 barrels per day, leaving the remainder to be stored or marketed elsewhere. As a result, several Chevron-chartered tankers have waited days to discharge at U.S. ports.

The glut has been exacerbated by a shift in global demand. China, previously the largest buyer of Venezuelan crude, has not received shipments since the January political transition, and state-owned PetroChina has paused purchases while it evaluates the situation. That has removed a major outlet for the oil, intensifying pressure on the U.S. market.

India may offer a partial release valve. President Trump recently announced a trade agreement encouraging India to cut Russian oil imports in favor of supplies from the U.S. and potentially Venezuela, and Reliance Industries is considering Venezuelan cargoes, which could help reduce storage backlogs in the Caribbean and ease congestion at Gulf Coast ports.