By Kimberley Kao
Chinese oil stocks weakened after the U.S. ousted Venezuelan President Nicolás Maduro over the weekend, raising concerns it could limit China's access to oil.
A cut in Venezuelan sales to China could be more significant than on the U.S. as Venezuelan crude makes up about 5%-8% of China's total imports, compared to 1%-2% for the U.S., Lim Sin Kiat, analyst at Kenanga Investment Bank said in a note. "A total shutdown might affect China more, especially the refineries," Lim said.
Also, the type of crude Venezuela produces is thicker than most oil consumed on the global market, and in China can wring more profit out of it than other grades of crude, making it highly attractive for fuel makers.
Although Venezuela is a relatively small supplier of China's oil imports, Vishnu Varathan, managing director at Mizuho Securities said: "Denying China access to Venezuelan oil has accentuates China's energy-shipping risks."
He noted that all other Chinese crude imports have to pass through shipping lanes that could be potential choke points, such as the Straits of Malacca.
Hong Kong-listed shares of Cnooc and Sinopec were down 4.0% and 1.5% respectively. PetroChina fell 4.5%.
"The initial implications for Asia's markets probably include a bias for oil prices to head lower over time, which could be positive at the margin for larger oil importers in Asia," said Michael Wan, senior currency analyst at MUFG.
Oil markets are expected to be in surplus this year, and Venezuelan supply could pressure prices lower, "even as there is uncertainty around whether and how quickly Venezuela may be able to ramp up oil production and also regime stability," Wan added.
The Venezuela crisis is unlikely to move the needle for oil prices, because "after years of sanctions and neglect to its oil infrastructure, Venezuela is no longer a major oil producer," said UOB Global Economics & Markets Research team in a note.
Energy stocks in other Asian markets were broadly higher.
Inpex and Japan Petroleum Exploration were 1.6% and 2.3% higher respectively in Tokyo. South Korea oil refiners SK Innovation and S-Oil rose 2.4% and 6.2%, respectively.
Oil futures were trading in a tight range on Monday, swinging between gains and losses.
Write to Kimberley Kao at kimberley.kao@wsj.com
(END) Dow Jones Newswires
01-05-26 0038ET
