Oil buyers in Asia are demanding deep discounts on Venezuelan crude due to a flood of sanctioned oil from Russia and Iran on offer and to heightened risk of loading in the South American country as the U.S. boosts its military presence in the Caribbean, traders and other sources said. Venezuela has managed to increase oil exports this year from 2024 volumes even as Washington has ratcheted up pressure on President Nicolas Maduro. The U.S. Navy has not disturbed oil tankers from Venezuela but it has struck boats in the Caribbean Sea that were suspected of smuggling drugs. President Donald Trump’s administration has threatened to extend military operations to land targets.

Growing export volumes reflect state-run PDVSA’s effort to avoid a collapse of oil revenue. Low global crude prices have hit Venezuela’s heavy crude grades harder due to quality and U.S. sanctions, according to traders and company sources. The state oil company is still struggling to fill the country’s pockets. Top Asian buyer China is flooded with rival sanctioned crude. To move product, traders said, PDVSA has been forced to slash prices, with the discount below Brent crude about double year-ago levels.

“PDVSA does not have much negotiation power,” one of the people said. “It has been forced to agree to reduced prices because shippers involved are taking higher risks to load at Venezuelan ports, close to where the U.S. has military vessels anchored.” With abundant Russian and Iranian supplies also sold at deep discounts, buyers in China in recent weeks were barely biting at offers of Venezuela’s flagship Merey heavy crude at $14 per barrel below Brent, a trader involved in sales to Chinese independent refiners said.

A cargo of the same Venezuelan grade was recently sold for early 2026 delivery at $15 per barrel below Brent, another trader said. Late last year, traders said, they were applying discounts of between $5 and $8 per barrel below Brent for Venezuela’s heavy oil for delivery in China.

Venezuela’s Maduro relies on oil revenue to keep subsidies and government programs running to minimize domestic turmoil and cope with mounting U.S. political pressure after a disputed 2024 election.

This year, China has been the destination of between 55% and 90% of Venezuela’s oil exports, compared with 40%-60% last year. In November, the OPEC country sent 746,000 barrels per day (bpd) to China, according to ship monitoring data.

PDVSA did not reply to a request for comment. Last week, Venezuela’s oil minister Delcy Rodriguez said oil output rose to 1.17 million bpd in November, from 1.13 million bpd the previous month.

CAUTIOUS WITH PORTS

U.S. military vessels in the Caribbean Sea have not interrupted Venezuela’s oil shipments, according to ship monitoring data and documents. The country’s oil exports rose slightly to some 921,000 bpd in November, the third-highest monthly average this year, while fuel imports more than doubled to some 167,000 bpd.

Last month, PDVSA’s partner Chevron increased crude exports to the U.S. to some 150,000 bpd from 128,000 bpd in October, and supplied its joint ventures with naphtha to dilute their extra heavy crude output.

The country’s naphtha imports, including from Russia, have allowed PDVSA to keep diluent stocks high to secure stable exports of crude blends in coming months, the documents showed.

Shipping contracts to transport Venezuela crude to all destinations have grown more expensive as vessel owners include “war clauses” to protect them from delays, interruptions or potential seizures by U.S. military ships near Venezuela’s shores.

A “war clause” in a contract allows ship owners to avoid routes and obligations when facing war risks by permitting safe discharge at alternative ports, the charge of extra freight fees and voyage cancellations in conflict zones.

While the clause does not necessarily imply a significant expense for shippers covering short routes to the U.S. or the Caribbean, they can inflate freight costs for longer routes to Asia, forcing PDVSA to increase price discounts to accommodate them, the sources said.

(Reporting by Marianna Parraga in Houston and Aizhu Chen in Singapore; additional reporting by Deisy Buitrago. Editing by Nathan Crooks and David Gregorio)