The Daley Note

Valero Energy (VLO) is positioning to capitalize on improved access to the Venezuelan market as sanctions ease and trade flows reopen.

The company has engaged with three authorized sellers of Venezuelan crude oil and expects to purchase up to 6.5 MMbbl in March (~210 Mb/d). If those volumes materialize as planned, Valero would join Chevron (CVX) as the largest US refiners of Venezuelan crude.

Chevron imported ~220 Mb/d of Venezuelan crude in January and plans to raise import volumes in the coming months. Phillips 66 (PSX) and CITGO Petroleum are also joining the trend by moving to buy heavy crude directly from Venezuela’s state-owned PDVSA starting in April 2026.

This strategy fits well with Valero’s refinery network. Venezuela produces heavy sour crude, and Valero has some of the most advanced heavy-cracking assets on the Gulf Coast. VLO can run these barrels through its Texas City, Bill Greehey and Port Arthur refineries. Valero has ample experience with Venezuelan barrels; before sanctions were imposed in 2019, the company processed ~240 Mb/d of Venezuelan imports.

Since then, Valero has upgraded its ability to process heavy crude. In 2023, VLO completed a major coker project at Port Arthur, increasing the refinery’s crude throughput capacity to ~435 Mb/d and boosting its ability to upgrade heavy, high-resid crude slates. The expansion gives Valero more flexibility to absorb Venezuelan volumes today than it had in the pre-sanctions period.

As Venezuelan volumes return, the impact will extend beyond Valero’s slate into the broader heavy crude market. Venezuelan heavy competes directly with Western Canadian Select (WCS) and Mexican Maya due to similar crude qualities and refining economics. On its 4Q25 earnings call, management acknowledged this dynamic and indicated that Venezuelan crude will comprise a significant portion of its heavy slate in the coming months.

If Venezuelan crude continues to ramp, it could displace other heavy barrels in the Gulf Coast market, or force these suppliers to lower prices to remain competitive. That risk is particularly acute for Canadian barrels. For example, VLO’s Texas City refinery received ~827 Mb of crude in January from South Bow (SOBO) Marketing, a company closely tied to Canadian heavy crude logistics.

See East Daley Analytics’ Crude Hub Model for more details. Valero is well positioned to capture upside from returning Venezuelan heavy sour volumes given its Gulf Coast refiners and expanded coking capacity. As supply ramps, the company could enhance its feedstock margin advantage, while WCS and Maya barrels face heightened competitive pressure on the Gulf Coast. – Keland Rumsey Tickers: CVX, PSX, SOBO, VLO.