India’s strategy of turning to Venezuelan crude as an alternative source of oil has become increasingly expensive, as discounts on Venezuelan grades have narrowed and shipping costs from the Americas have surged. The delivered cost of Venezuela’s heavy, acidic Merey crude has risen by about 50% to a record $95 a barrel, while freight rates have more than doubled to $8-$10 a barrel. The deterioration in economics is beginning to slow what had been a sharp increase in Venezuelan crude purchases by Indian refiners.
The shift comes as disruptions in the Middle East have reduced India’s access to traditional suppliers of medium and sour crude, forcing refiners to look farther afield. Venezuela became an important alternative because its heavy crude is compatible with some Indian refineries, particularly Reliance Industries’ large refining complex. However, shrinking discounts, higher freight costs and stronger competition from US refiners are making Venezuelan barrels less attractive just as India faces broader pressure from elevated global oil prices and disrupted shipping routes.
Why Has Venezuelan Crude Become More Expensive?
Venezuelan crude was initially attractive to Indian refiners because it was available at a significant discount to international benchmarks.
That discount helped offset the additional costs associated with transporting heavy crude from South America to India.
However, the discount has now narrowed substantially.
The delivered cost of Merey crude has climbed to about $95 a barrel, while freight rates from the Americas have risen to $8-$10 a barrel.
| Venezuelan Crude Cost Factor | Earlier Situation | Current Situation |
|---|---|---|
| Delivered Merey crude | Lower-cost alternative | About $95/barrel |
| Delivered price in Mar-Jun 2025 | $56/barrel | $93.3/barrel in Mar-Jun 2026 |
| Freight from Americas | Lower | $8-$10/barrel |
| Discount to Brent | Double-digit | Narrowing |
| India imports | Rising rapidly | Growth beginning to slow |
The result is that Venezuela is no longer the unusually cheap alternative it was when Indian refiners first increased purchases.
India’s Venezuelan Oil Imports Surged After the West Asia War
India began increasing Venezuelan crude purchases as disruptions in the Middle East affected supplies of medium and sour crude.
Imports from producers in the region fell sharply.
Shipments of medium and sour grades from West Asia declined to about 1.48 million barrels per day, compared with 3.1 million barrels per day in February before the disruption.
That created a supply gap for Indian refiners.
India’s Crude Supply Shift
Traditional West Asian suppliers
↓
Shipments fall
↓
Medium and sour crude becomes harder to obtain
↓
India searches for alternatives
↓
Russia + Venezuela gain importance
↓
Venezuelan imports surge
The shift was particularly important for refiners that had the equipment necessary to process heavier grades.
Venezuela Became India’s Fourth-Largest Supplier
Venezuela was India’s fourth-largest crude supplier in July, providing about 218,000 barrels per day.
That is a major change from the period before the recent Middle East disruption.
India’s purchases from Venezuela had previously exceeded 200,000 barrels per day in October 2020, but volumes had remained much lower for years following US sanctions and changes in global oil flows.
| India-Venezuela Oil Trade | Figure |
|---|---|
| Venezuelan crude imports in July | 218,000 bpd |
| Average Venezuelan Merey imports, Apr-Jul | 262,000 bpd |
| Previous period when imports exceeded 200,000 bpd | October 2020 |
| India’s total crude imports in July | About 5 million bpd |
| Venezuela’s July share of India’s crude basket | About 4.4% |
The July figure demonstrates how quickly Venezuela has re-emerged as a supplier for India.
Merey Crude Is Particularly Important
Merey is a heavy and acidic crude grade.
It is more difficult to process than lighter, sweeter crude because it contains characteristics that require sophisticated refinery equipment.
India has some of the world’s most complex refining facilities, making the country well positioned to process such crude.
Reliance Industries is particularly important because its Jamnagar refining complex has the equipment and blending capabilities needed to handle heavy crude.
Why Indian Refineries Can Process Venezuelan Oil
Heavy Venezuelan crude
↓
Complex refinery
↓
Specialized processing equipment
↓
Blending capability
↓
Petroleum products
This refining flexibility gives Indian companies an advantage over refiners that cannot efficiently process heavy sour grades.
Reliance Has Been a Major Beneficiary
Reliance Industries increased its exposure to Venezuelan crude because its refinery infrastructure can process Merey and other heavy grades.
The company’s ability to handle these crude types makes Venezuelan oil a potential substitute when other medium and sour supplies become unavailable.
However, the economics have become more challenging.
Reliance has also reduced its Russian oil purchases substantially this year, creating a need for alternative crude supplies.
According to EU and Kpler data, Reliance has cut Russian crude purchases by around two-thirds to about 200,000 barrels per day from 2025 levels.
Reliance’s Crude Challenge
Russian crude purchases fall
↓
West Asian supplies disrupted
↓
Need for medium/sour crude
↓
Venezuelan crude becomes important
↓
Venezuelan discount narrows
↓
Freight rises
↓
Cost advantage weakens
The company therefore faces a more complicated crude procurement environment.
Freight Costs Are Eating Into the Discount
One of the biggest problems for Venezuelan crude is transportation.
Venezuela is geographically far from India.
The crude must travel across the Atlantic and around major shipping routes before reaching Indian ports.
When tanker availability tightens, transportation costs can quickly erase the price advantage offered by discounted crude.
Freight rates for supplies from the Americas have more than doubled to $8-$10 per barrel.
Crude Economics
Crude discount
−
Higher freight
−
Higher insurance and shipping risk
↓
Lower delivered-cost advantage
This is why a crude cargo that looks cheap at the source can become expensive once it reaches India.
Delivered Prices Have Increased Sharply
Indian customs data shows how dramatically Venezuelan crude costs have changed.
The average delivered price of Venezuelan oil at Indian ports was $93.3 per barrel during March-June, compared with $56 per barrel during the same period a year earlier.
That represents an increase of approximately 67%.
| Period | Average Delivered Price |
|---|---|
| March-June 2025 | $56/barrel |
| March-June 2026 | $93.3/barrel |
| Increase | ~$37.3/barrel |
| Percentage increase | ~67% |
This sharp increase shows why Venezuelan oil is losing some of its previous cost advantage.
Brent Prices Are Making the Problem Worse
Venezuelan crude prices are linked to international benchmarks such as Dated Brent.
That creates another challenge.
When Brent prices rise, the absolute price of Venezuelan crude can rise even if the discount remains.
Brent had fallen to around $70 a barrel before climbing above $90 following renewed tensions in the West Asia conflict.
Brent is currently around $89 a barrel.
Brent Price Effect
Brent falls
↓
Venezuelan benchmark falls
↓
Indian refiners benefit
But when:
Brent rises
↓
Venezuelan benchmark rises
↓
Discount must widen to preserve value
↓
If discount narrows
↓
Delivered cost rises sharply
With Venezuelan discounts shrinking, Indian refiners are facing both higher benchmark prices and higher transportation costs.
Why Are Venezuelan Discounts Shrinking?
The main reason is changing supply and demand for medium and sour crude.
Venezuelan crude is no longer competing for a small number of buyers.
Indian refiners are buying more.
US refiners are also seeking alternatives because their Middle Eastern crude supplies have been affected.
That creates competition for Venezuelan barrels.
Competition for Venezuelan Crude
India
+
US refiners
+
Other international buyers
↓
Higher demand
↓
Less need for large discounts
↓
Venezuelan sellers gain pricing power
↓
Discounts shrink
This is reducing the advantage that originally attracted Indian buyers.
US Gulf Coast Refiners Are Increasing Competition
Refiners in the US Gulf Coast region, particularly those in Petroleum Administration for Defense District 3, are also looking for medium and sour crude.
As their Middle Eastern supplies decline, they have become stronger competitors for Venezuelan barrels.
This creates a direct challenge for Indian refiners.
India has to pay more to secure crude from Venezuela or look for alternative sources.
Russia Has Also Become More Expensive
Venezuela is not the only alternative becoming more expensive.
Russian crude, which had traditionally been available to India at a substantial discount, has also changed dramatically.
Russian crude was trading at a discount to Dated Brent but has now moved to a premium of around $1 per barrel on a delivered basis.
The change follows disruption to shipping through the Strait of Hormuz and attacks on tankers using the Bab el-Mandeb route.
| Crude Source | Recent Pricing Trend |
|---|---|
| Venezuelan crude | Discount narrowing |
| Russian crude | From discount to ~$1 premium to Dated Brent |
| Brent | Around $89/barrel |
| Iranian crude in June | About $120/barrel |
| Venezuelan delivered crude | About $95/barrel |
This leaves Indian refiners with fewer genuinely cheap alternatives.
Russia Still Dominates India’s Crude Basket
Despite the higher cost, Russia remains India’s biggest crude supplier.
Russia accounted for more than 55% of India’s total crude imports in July.
India imported a record 2.78 million barrels per day of Russian oil during the month.
With total Indian crude imports at about 5 million barrels per day, Russian crude remains the backbone of the country’s supply system.
India’s July Crude Basket
Russia
2.78 million bpd
↓
Venezuela
218,000 bpd
↓
Other suppliers
Remaining volume
The figures show that Venezuela is important as a diversification source but is still far smaller than Russia.
Indian State Refiners Prefer Russian Urals
Public-sector refiners have largely increased their purchases of Russian crude rather than Venezuelan Merey.
The reason is refinery compatibility.
Russian Urals is a medium, sour crude grade that fits the configuration of many Indian state-owned refineries.
Venezuelan Merey is heavier and cannot be processed in large volumes by many of these facilities.
Refinery Compatibility Matters
Russian Urals
↓
Medium + sour
↓
Compatible with many Indian refineries
Venezuelan Merey
↓
Heavy + acidic
↓
Requires more specialized processing
This limits how much Venezuela can realistically replace Russian crude in India’s overall oil basket.
Indian Oil Has Changed Its Buying Pattern
Indian Oil Corporation has significantly increased Russian crude purchases.
The company bought more than 1 million barrels per day in July.
That compares with about 406,000 barrels per day in February.
The shift reflects the disruption to supplies from traditional Middle Eastern sources.
| Indian Oil Purchases | February | July |
|---|---|---|
| Crude purchases | 406,000 bpd | >1 million bpd |
| Increase | — | More than 2.4X |
Indian Oil’s purchasing pattern illustrates how state refiners are adapting to the changing availability of crude grades.
India’s Crude Supply Has Become More Expensive
The broader problem is that several sources of crude are becoming less economical simultaneously.
Venezuelan crude is more expensive.
Russian crude has lost its discount.
Middle Eastern supplies have been disrupted.
Freight costs are elevated.
Brent is near $90.
Together, these factors increase India’s overall crude procurement costs.
India’s Oil Cost Pressure
Middle East disruption
+
Higher freight
+
Narrow Venezuelan discounts
+
Russian premium
+
Higher Brent
↓
Higher crude acquisition costs
↓
Pressure on refinery margins
↓
Potential pressure on fuel economics
This is particularly important for a country that imports the majority of its crude oil requirements.
The West Asia Conflict Has Reshaped India’s Oil Map
Before the latest disruption, India had a relatively diversified crude procurement strategy.
Middle Eastern suppliers accounted for a large share, while Russia had become a major source after the Ukraine war.
The West Asia conflict has altered that balance.
India has had to seek supplies from farther away, including Venezuela.
That has increased the importance of shipping availability and freight rates in determining which crude grades are economically viable.
Distance Is Becoming a Strategic Factor
In normal market conditions, crude price differences can determine purchasing decisions.
During a shipping disruption, distance becomes much more important.
A cheap barrel from Venezuela may not be attractive if freight costs rise sharply.
Similarly, discounted Middle Eastern crude may become expensive if tankers are unwilling to enter dangerous waterways.
Delivered Cost Formula
Crude price
+
Freight
+
Insurance
+
Risk premium
+
Other logistics costs
↓
Delivered crude cost
Indian refiners increasingly have to optimize based on this final number rather than the headline crude discount.
India’s Refiners Are Being Forced to Become More Flexible
The changing crude market rewards refiners capable of processing a wide range of crude grades.
Complex refineries can switch between different sources depending on pricing and availability.
This gives companies such as Reliance an advantage.
However, refinery flexibility has limits.
Not every refinery can switch from medium sour crude to very heavy Venezuelan crude without operational and economic consequences.
The Cost Difference Could Affect Refining Margins
Higher crude acquisition costs can reduce refinery margins if product prices do not rise at the same pace.
Refiners buy crude and sell products such as gasoline, diesel, jet fuel and petrochemicals.
If crude becomes more expensive while product prices remain relatively stable, the difference between input and output values narrows.
Refinery Margin Pressure
Higher crude cost
↓
Product prices unchanged
↓
Narrower spread
↓
Lower refining margin
↓
Potential pressure on profits
Large integrated refiners can partially offset the impact through optimization and product exports, but sustained crude-cost increases remain a challenge.
India May Need More Diverse Suppliers
The latest developments highlight the importance of maintaining a broad supplier network.
India cannot rely entirely on one region or crude grade.
Potential alternatives include:
- Russia
- Venezuela
- Iraq
- Saudi Arabia
- United Arab Emirates
- United States
- West African producers
- Other Latin American suppliers
The challenge is finding barrels that are both physically available and economically attractive after freight and insurance.
Venezuela Remains Strategically Important
Even though Venezuelan crude has become more expensive, it remains strategically valuable for India.
The country has enormous oil reserves and can provide heavy crude grades that some Indian refineries are designed to process.
The renewed relationship also gives India another option when Middle Eastern supply is disrupted.
The problem is that the economics must remain competitive.
The Numbers Tell the Story
$95/barrel
Delivered cost of Venezuelan Merey crude
$93.3/barrel
Average delivered Venezuelan crude price in March-June
$56/barrel
Average price during the year-earlier period
$8-$10/barrel
Freight cost from the Americas
$89/barrel
Approximate current Brent price
$1/barrel
Approximate Russian crude premium to Dated Brent on a delivered basis
218,000 bpd
Venezuelan crude supplied to India in July
262,000 bpd
Average Venezuelan Merey imports during April-July
2.78 million bpd
Russian crude imports by India in July
5 million bpd
India’s total crude imports in July
55%+
Russia’s share of India’s crude imports in July
What This Means for India’s Energy Security
The latest crude-market shift demonstrates both the strength and vulnerability of India’s diversified energy strategy.
India has been able to replace disrupted Middle Eastern barrels with Russian and Venezuelan crude.
That flexibility has prevented a much larger supply shock.
But the replacement barrels are becoming more expensive.
The country therefore faces a new challenge: securing enough crude is one problem, but securing it at an economically attractive price is another.
What Refiners Will Watch Next
Indian refiners will closely monitor several factors over the coming months.
These include:
- Venezuelan crude discounts
- Freight rates from the Americas
- Russian crude premiums
- Strait of Hormuz shipping conditions
- Bab el-Mandeb traffic
- Brent crude prices
- Middle Eastern crude availability
- US refinery demand for heavy crude
- European sanctions affecting Russian oil
Any improvement in shipping conditions could quickly change the economics.
What Could Make Venezuelan Crude Attractive Again?
Venezuelan crude could regain its price advantage if discounts widen again.
A decline in freight rates would also improve its delivered economics.
Higher Venezuelan production could increase supply and put downward pressure on prices.
Conversely, stronger demand from US refiners could keep discounts narrow.
Venezuelan Crude Outlook
Freight falls
+
Discount widens
+
Venezuelan supply rises
↓
More attractive for India
But:
Freight rises
+
Discount narrows
+
US demand increases
↓
Less attractive for India
The balance between these factors will determine future Indian purchases.
Looking Ahead
Venezuelan crude has quickly moved from being one of India’s most attractive alternative supplies to a much more expensive option. Delivered Merey prices have reached about $95 a barrel, while freight from the Americas has climbed to $8-$10 a barrel and discounts have narrowed significantly. At the same time, Russian crude has moved from a discount to a premium over Dated Brent, while Middle Eastern supplies remain constrained by shipping disruptions. These developments mean Indian refiners have fewer low-cost options even as they retain access to a diversified global crude market.
For India, the immediate priority will be balancing supply security with procurement economics. Venezuela will remain important because some Indian refineries can process its heavy crude, but sustained purchases will depend on whether the discount is large enough to compensate for freight and other costs. If shipping conditions improve and Venezuelan discounts widen, Indian buyers could increase purchases again. If freight remains elevated and competition from US refiners continues, Venezuelan crude may remain a secondary source rather than a cheap replacement for disrupted Middle Eastern barrels.
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