TRUMP PRESSURES IRAN AND VENEZUELA, THE MARKET REACTS

El Taladro Azul

M. Juan Szabo [1] y Luis A. Pacheco [2]

Published  Originally in Spanish in  LA GRAN ALDEA

 

In what appears to be a return to the 1970s, the oil market is experiencing volatility driven by political instability in producing countries, particularly Iran and Venezuela. Geopolitical and climatic factors are thus counterbalancing projections of supply surplus that have been weighing on prices.

Equally significant, production growth estimates are not being met either within or outside OPEC, while demand continues to grow, driven partly by the expansion of China's strategic reserve and improved global economic performance, including in the United States.

Geopolitical Volatility

President Trump's shifting decisions regarding the Iranian crisis and what appears to be his growing influence in Venezuela have had significant repercussions on market expectations. Mid-week, amid a possible U.S. military intervention in Iran to halt the Islamic regime's brutal repression of opposition protesters, prices exceeded $66/bbl (Brent); however, the cancellation of that attack eliminated much of the initial increase.

Similarly, the conflict between Russia and Ukraine continues to affect the market. Russia carries out ongoing attacks against Ukrainian cities and civilian targets to weaken population morale, while Ukraine directs its offensives against the Russian energy system, seeking to undermine its economic capacity. These recent actions have damaged the Caspian Pipeline Consortium (CPC) maritime terminal at Yuzhnaya Ozereevka on the Black Sea, reducing Kazakhstan's export capacity by approximately 10% following Ukrainian drone attacks.

Oil as Strategy

The oil market and the entire region are closely watching developments in Venezuela, though without reaching definitive conclusions, given the complexity of assessing the net impact on the global oil balance. The White House is promoting production growth in Venezuela, though without a clear timeline.

The recent U.S. involvement in Venezuela, particularly regarding oil, is likely strategically designed as a counterweight to OPEC+ energy policy, especially concerning Persian Gulf countries that have shifted from a strategy of price-reactive production cuts to one aimed at recovering market share in the Americas (United States, Brazil, Guyana, and Canada).

This strategy, implemented during 2025, has achieved partial victories, but at the cost of prematurely exhausting much of its spare production capacity. The redirection of investments toward natural gas projects, energy transition, and long-term developments has also impacted production, which, at the beginning of the year, is below announced levels.

Geopolitical Balance

Long-term supply commitments by these countries to China, together with integration into Asian trading systems, have strengthened commercial interdependence without affecting existing security ties with the United States. This situation exemplifies a hedging strategy that prioritizes flexibility over exclusivity in international alliances, which appears to be the best response to the White House's new geopolitical vision.

Market Summary

In summary, the oil market has responded dynamically to geopolitical events in Iran, Venezuela, and other relevant areas, in a context of abundant but increasingly tight supply, sustained demand, and supply that falls short of expectations. At the close of Friday, January 16, Brent and WTI crude traded at of $64.13/bbl and $59.34/bbl, respectively, up approximately 1% from the previous week.

VENEZUELA

Genuine Will for Change or Flight Forward?

Venezuela is currently experiencing a crucial moment in its long oil history. Although it possesses one of the world's largest proven oil and gas reserves, it suffers from having dismantled its industry and is now unable to transform that potential into sustainable production, economic growth, political stability, and international confidence. According to President Trump's statements, U.S. intervention will bring significant changes to the country, particularly to its oil industry.

The Chavista establishment appears to be reacting to U.S. pressure by promoting political and legislative transformations that the country had been demanding for decades, unsuccessfully. It remains to be seen whether this will have the support of the Chavista base and, particularly, the military forces.

U.S. Tutelary Control

The Trump administration quickly implemented a mechanism through oil that closely resembles tutelary control. The argument is that to avoid civil war and stabilize Venezuela's political and economic situation, it was preferable to exercise such control through Delcy Rodríguez, who assumed functions proper to the head of state by mandate of the Supreme Court of Justice, apparently to minimize questions about her legitimacy. Naturally, the narrative from Delcy Rodríguez and the new regime emerging with her is that Venezuela is a sovereign country and that its relationship with the U.S. is purely transactional, ataimed to bringing Venezuela out of its international isolation.

In any case, while the regime puts on the mask of institutions once again, following the military intervention of January 3 and Maduro's forced removal, authorities declared a state of exception and ordered the detention of individuals allegedly supporting the U.S. incursion, thus intensifying repression and reactivating the so-called revolving door of political prisoners.

Controversial Legislative Reforms

In parallel, both the legitimate opposition and international actors called for recognition of Edmundo González's electoral victory, while labeling Delcy Rodríguez's inauguration as illegitimate. The U.S. government ignored these calls, and on January 5, 2026, the legislature corresponding to the 2026-2031 period was installed under Chavista control. This new National Assembly, whose legitimacy is also questionable, announced it would undertake profound legal reforms, including modifications to the Electric System Law and the Organic Hydrocarbons Law, the latter of which is considered partially responsible for the lack of competitiveness in the national oil sector.

Commercialization Under U.S. Conditions

Despite the Caracas regime's boasts of sovereignty, the fact is that the announced commercialization of Venezuelan crude at market prices, under conditions defined by the White House, has already begun. The oil is destined for the U.S. market, and trust funds have been established to accumulate proceeds from these sales to protect against creditor lawsuits. Treasury Secretary Scott Bessent promised to repeal the associated sanctions and to hold meetings with the World Bank and the IMF to reestablish relations with Venezuela.

Likewise, according to Reuters and Bloomberg, Chevron's license terms were revised, OFAC licenses were granted for commercial operations involving Venezuelan crude, and administrative mechanisms were established to manage fund flows to the BCV. Simultaneously, the process of reopening the U.S. embassy in Caracas began, and CIA Director John Ratcliffe made an official visit.

Stabilization Prospects

Various economic actors in Venezuela, as well as the U.S. administration, believe the country is moving toward a stabilization phase as the initial step in the transition plan presented by Marco Rubio. Meanwhile, elements of the second phase are being developed, focused on reactivating the oil industry.

However, immediate results are expected only from Chevron's activities and those of other previously licensed companies, as the rest of the potential investments will depend on the competitiveness of the announced legal reforms and the legal and personal guarantees provided in future oil block contracting processes. Overall stability and regime legitimacy remain determining factors in investment decisions.

It is also possible that the already negotiated natural gas projects in Trinidad could be revived despite the new uncertainties introduced by the new stability, though this may seem a contradiction in terms.

The Uncertain Political Future

Finally, the question arises whether the current stabilization will seek to prolong the tenure of a delegitimized government or, in a third phase, lead to a democratization process that respects the popular will expressed in July 2024 or to new general elections.

Integration into the U.S. Energy System

Within the framework of U.S. efforts to rapidly integrate Venezuelan crude into its energy system, it is reported that consideration is being given to substituting it with lighter crude for storage in the Strategic Petroleum Reserve (SPR), while Venezuelan crude is destined for Gulf of Mexico refineries.

Additionally, the Central Bank of Venezuela (BCV) has been authorized by OFAC to receive the first revenues from the sale of previously blocked crude, allocating up to $500 million to imports for the agro-industrial sector, which will benefit the foreign exchange market in the new context.

Nicolás Maduro already seems to be merely a worn and yellowed page in Chavista history, at least in the book of his until recently comrades, followers, and partners.

OIL OPERATIONS

Oil activities during this past week focused on normalizing processes seriously affected by the naval blockade and the subsequent rush to redirect shipments to the U.S. market.

Production fields have been reopening with varying results. In the West, almost everything affected was recovered, while in the Orinoco Belt, in the east of the country, recovery has been slower.

Weekly Production

This week's production was 843 thousand barrels per day (843 Mbpd), geographically distributed as follows:

• West: 238 Mbpd (Chevron: 102 Mbpd)
• East: 112 Mbpd
• Orinoco Belt: 493 Mbpd (Chevron: 126 Mbpd)
• TOTAL: 843 Mbpd (Chevron: 228 Mbpd)
• 
  

Refining

National refineries processed 218 Mbpd of crude and intermediate products, yielding 76 Mbpd of gasoline and 62 Mbpd of diesel.

Exports

No official information exists on export volumes. We can only estimate that approximately 20 million barrels of stored crude will be liquidated, in addition to what Chevron routinely transports to the U.S. market. This corresponds to approximately 830 Mbpd of crude exports in January. We estimate the average price achieved in this crude sales process at $49.6/bbl.

[1]: International Analyst [2]: Nonresident Fellow, Baker Institute

 

Oil Geopolitics and the New American Order

El Taladro Azul

M. Juan Szabo [1] y Luis A. Pacheco [2]

Published  Originally in Spanish in  LA GRAN ALDEA  

  

Although the beginning of 2026 suggested that the oil market would continue grappling with the threat of oversupply, the first days of the month have brought unexpected developments that, if sustained, could influence the market's direction. Venezuela and Iran, two OPEC member countries, face growing political instability, while Russian production has begun to feel the effects of sanctions.

Situation in Venezuela

The American attack on military installations in Venezuela and the extraction of Nicolás Maduro and his wife, Cilia Flores, continue to reverberate throughout the Western Hemisphere. Despite harsh criticism from regional governments, U.S. President Donald J. Trump has framed this action within what he has dubbed the "Donroe Doctrine," a modern version of the 19th-century Monroe Doctrine, and warns of further actions to control drug trafficking and what he calls the protection of American citizens.

The effects of this new U.S. foreign policy, leveraged by the military power displayed in the Caribbean and through actions in Venezuela, are already spilling over into Cuba, Colombia, Mexico, and even Brazil. Tense discussions between the U.S. and Denmark about Greenland's future can also be considered part of this new doctrine. In short, Washington is expressing a holistic vision of the Americas from Tierra del Fuego to Greenland. Trump does not want other superpowers' influence in his "backyard," much less their participation in the continent's natural resources—or at least that is the rhetoric.

Russia-Ukraine Conflict

Military actions between Russia and Ukraine continued this week with scant advances on the ground and little to no progress in ceasefire negotiations. A Ukrainian drone attack on an oil tanker bound for Russia in the Black Sea and another attack that set fire to a refinery in Volgograd raised concerns about further disruptions to Russian crude supply due to the conflict.

Additionally, reports earlier this week suggested that Trump will approve a bipartisan bill proposing even stricter restrictions on countries trading with Russia, in a continuing effort to pressure Moscow toward a ceasefire. One collateral effect of these sanctions is the Iraqi government's approval of a plan to take control of operations at the West Qurna 2 oil field (operated by Lukoil) to avoid disruptions caused by U.S. sanctions against Russia. This oil field is one of the largest in the world.

Crisis in Iran

In Iran, initial street protests over the economic situation have intensified and transformed into mass calls against the ayatollahs' regime. The opposition in exile, opportunistically led by the son of Iran's last Shah, is promoting civil disobedience. The country has been virtually isolated from the outside world after authorities blocked the internet to hinder the organization of new protests and the dissemination of news about them. Phone calls were not reaching the country; flights were canceled, and Iranian news sites were only updating intermittently.

The protests have been ongoing for two weeks, while authorities intensify their crackdown on demonstrators and label them "enemies of God," a charge that carries the death penalty. Many casualties have been reported among protesters, though reports are confusing. Adding to the complexity, President Trump has threatened Iran's regime with military action, which would open another front for the already omnipresent U.S. administration.

Market Impact

All these geopolitical events, combined with another reduction in U.S. crude inventories that aligns with global terminal inventories, are changing the market's perception of the supply-demand balance at the beginning of 2026, bringing it closer to reality.

Consequently, the Brent and WTI benchmark crudes traded at $63.34/bbl and $59.12/bbl, respectively, at Friday's market close on January 9, up more than 4% from the previous week's close.

VENEZUELA

Forced Transformation of Venezuelan Oil

Just over a week ago, Caracas and the country's Caribbean coast witnessed a surprising and effective military action that ended with the capture of the occupant of Miraflores Palace and his wife, who now face U.S. justice in a New York state court. As expected, this American action has elicited mixed reactions not only in Venezuela but worldwide.

That a foreign country would violate Venezuelan territory is something that should not please any Venezuelan, just as the presence of Cuban troops, Colombian terrorist groups, and other allies of the Chavista regime is unacceptable. This unfortunate outcome is prime evidence of what can happen when internal and regional political actors ignore the institutional and legal decay that has been ongoing in Venezuela for more than two decades.

The New Interim Government

To the surprise of many, the capture of Nicolás Maduro and his wife did not lead to the fall of the Chavista regime. On the contrary, after brief confusion, Vice President Delcy Rodríguez was sworn in as acting president, and the Trump administration claims there is an agreement for Rodríguez to manage the transition, "supervised" by U.S. Secretary of State Marco Rubio and other Trump team executives. This state of affairs could indicate either a prior negotiation in which Maduro was the bargaining chip or an adaptation to an unexpected situation.

Even more curious is that Edmundo González Urrutia and María Corina Machado—the elected president from the July 2024 elections and the undisputed leader of the Venezuelan opposition—were sidelined in this entire operation (or, if we are generous in our interpretation, preserved for a moment to come). The fact is that the U.S. government has stated that the Venezuelan opposition was not prepared to take control of a complex transition, which is why it decided to negotiate with Chavismo.

The position of the acting president presents schizophrenic traits, as although she appears to have agreed to follow American instructions—threatened rather than of her own volition—she must attempt to maintain Chavista unity to survive. For now, an agreement seems to prevail between the Venezuelan interim government and the U.S. administration: Venezuela's regime, in the absence of concrete support from its foreign allies, would adhere to imposed instructions, while in Caracas, it continues to address its followers with anti-imperialist and pro-Maduro rhetoric.

Likely, the precarious state of the economy, showing signs of accelerated deterioration, and the fracturing of Chavista unity are defining the interim government's agenda—a government as illegitimate as it was under Nicolás Maduro. The positions of Diosdado Cabello, Minister of Interior, and General Padrino López, Minister of Defense, who control the security forces, remain unknown, generating all kinds of palace gossip.

Initial Actions and Measures

Following Washington's announcements, events began to unfold rapidly. The American fleet, maintaining an oil blockade on Venezuela, continued seizing tankers from the "shadow fleet" dedicated to transporting sanctioned crude. Half a dozen tankers were boarded and seized by the U.S. Coast Guard; one was even seized after a long high-seas pursuit and despite having changed to a Russian flag.

In Venezuela, the interim government, through the acting president's brother, announced the release of more than 80 political prisoners. Still, to date, this has been just one of many broken promises: only a dozen have been released, of which five are Spanish citizens. One of them is Rocío San Miguel, a well-known human rights defender.

Three-Phase Transition Plan

According to Secretary of State Marco Rubio, the post-Maduro process will have three phases: Stabilization, Recovery, and Transition. The phases will overlap and will not be strictly sequential.

Against this backdrop, it was announced that the U.S. and Venezuela had agreed that some 30 to 50 million barrels of Venezuelan crude currently in inventory on land or in vessels anchored off the Venezuelan coast would be sold on the American market at market prices, with sales proceeds held in an escrow account administered by the U.S.

In this regard, President Trump issued an executive order called "Safeguarding Venezuelan Oil Revenue For The Good Of The American And Venezuelan People," aimed at protecting Venezuela's escrow funds, managed by the U.S., from embargoes and legal actions. This order is part of the stabilization phase.

Complementing the control measure, a U.S. diplomatic group traveled to Caracas as an advance party for the potential reopening of the embassy in the city—another curious development, since after a military attack, diplomatic relations are usually severed. Major U.S. banks—JPMorgan, Bank of America, Wells Fargo, and Citi—are evaluating beginning operations in Caracas.

The Oil Agreement

At the same time, the Venezuelan regime describes the oil agreement with the White House as a Chevron-type transaction. Analyzing the statement, we interpret it to refer to conditions analogous to the repealed GL 41, since the current arrangement (incidentally, still secret) based on royalty payments in kind would make no sense.

Reading between the lines of both countries' announcements, we infer that, from the account managed and protected by U.S. authorities, a flow of timely payments will be maintained through U.S. banks, covering royalty payments, investments, local currency expenses, and income taxes. This flow of funds will allow Venezuelan authorities managing the economy to arrest the bolívar's devaluation and reduce the gap between the exchange rate systems, which, together with a reduction in inorganic money emissions, will help mitigate inflation and relieve pressure on the cost of living. Treasury Secretary Scott Bessent confirms that sanctions would be lifted to facilitate this process and that he will meet with the International Monetary Fund and the World Bank to renew relations with Venezuela.

Recovery Phase and the Oil Industry

For the recovery phase, in a meeting with CEOs of major oil companies at the White House, President Trump indicated that major U.S. oil companies would recover the deteriorated infrastructure and make the multimillion-dollar investments necessary to reactivate Venezuela's hydrocarbon industry.

The U.S. oil industry's response was not as enthusiastic as President Trump expected. Although there is generally much interest in investing in Venezuela, companies will not invest large sums of money without a sustainable and secure legal, fiscal, and institutional framework; the exception is likely companies like Chevron, Repsol, and Maurel & Prom which, driven by their need to recover debts from PDVSA, have structured deals under OFAC licenses that they can now replicate. In particular, Chevron, currently investing in the development of PetroIndependencia in the Orinoco Belt, may have a short-term impact.

ExxonMobil's CEO, Darren Woods—the world's largest private oil company—was the one who dared to express what many undoubtedly think but did not dare say: "If you look at the arrangements and commercial frameworks seen in Venezuela today, you cannot invest today." Trump's subsequent response, unsurprisingly, was that he did not like Woods' attitude. The White House seems to forget that the oil industry is accustomed to taking measured risks, risks that can be mitigated, unlike those in Venezuela today.

Three Scenarios for the Oil Future

To analyze Venezuela's oil future in light of so many uncertainties, we have developed three scenarios:

1. "American Dream" Scenario: The first and most aggressive includes U.S.-managed sales of production and inventories and the forced repeal (we do not believe Chavismo would do this voluntarily) of Venezuelan laws that obstruct the application of free-market conditions.

2. "Back to Reality" Scenario: The second scenario consists of a conceptually similar scheme but one that takes into account the times and requirements often indicated by oil companies, as well as the time required to establish a transitional mechanism applicable during the approval process for new laws and the fiscal and institutional framework, which would likely involve real political change.

3. "More of the Same" Scenario: The third and final scenario corresponds to a process in which U.S. control erodes as differences with the regime emerge that are difficult to overcome, and there is no transition.

According to our interpretation of how the system announced by the U.S. and PDVSA would function, we can conclude that the sale of crude accumulated during the blockade at market prices would have a marked effect at the start of what could be a virtuous cycle (scenarios 1 and 2). It is also observed that the volume difference between scenarios 1 and 2 is not significant during most of the first year. Our calculations indicate that, as announced, the trust would have sufficient funds to cover operations, investments, and payments to the state of legal obligations and, in the long run, to achieve a return on investment.

Unknowns and Concerns

Nevertheless, the process still has many unknowns—some because they have not been made public and others because there appears to be a marked degree of improvisation. One of the biggest unknowns is that no one has discussed how to ensure that a regime properly uses the funds generated, given a long history of corruption and inefficiency, and that this translates into shoring up what was intended to be transformed: a sort of Biden model.

It is also unclear what role the political opposition in Venezuela plays in the transition: elected president Edmundo González Urrutia and opposition leader María Corina Machado. So far, President Trump has only mentioned them briefly in the context of achievements toward the country's democratization. This week, President Trump and Ms. Machado are scheduled to meet, which could provide more clarity on this issue.

We believe that the best scenario for Venezuela is one in which there is a political change that guarantees institutional and fiscal changes that allow investments in the hydrocarbon sector and the beginning of the country's reconstruction; the opposition's challenge is to make it clear to all actors that they are the ones called to do it.

The country's economy has continued to collapse while these events unfold. The official exchange rate has reached Bs330/$, and the gap between the markets exceeds 100%. Undoubtedly, there is no time to waste in alleviating the suffering of the Venezuelan people.

Analysis of Expectations

Another relevant aspect in managing information and data related to Venezuela's production recovery process is the apparent consensus among renowned analysts such as Rystad, Wood Mackenzie, and Javier Blas that infrastructure deterioration only allows increases of 300 to 500 thousand barrels per day in the first years. We agree with this, not so much due to infrastructure limitations but because of the time required to activate rigs and other equipment and implement logistical arrangements.

It is also claimed that additional increases in Venezuelan production require Brent prices of $75-$80/bbl. We disagree with these concepts, which we consider to be based on myths rather than the realities of the country's oil situation. The combination of redevelopment and development in the Orinoco Belt or on the eastern coast of Lake Maracaibo, together with required infrastructure improvements, is highly competitive under the new legal and fiscal conditions that will apply during the reconstruction stage, with no limitations on access to diluents.

Most of the growth is highly attractive with price scenarios of $40 to $45/bbl. In our opinion, the constraints for a quick recovery are related to establishing a new legal and fiscal framework, to security and contractual conditions that allow companies to decide to invest in Venezuela, and to the time required to have equipment, materials, and personnel on site.

Oil Operations

Activities in production fields and terminals have been oriented toward reactivating closed production as storage space is freed up.

For now, the crude being shipped to the U.S. mostly corresponds to what is stored in tankers and to production from Campo Boscán, which did not suffer major disruptions during these times. Apparently, OFAC's license or instructions to Chevron have been expanded in scope regarding the crude it can transport to the U.S. market. Indeed, 11 tankers chartered by Chevron are heading to Venezuela, a number higher than the fleet it has used until now (7).

Additionally, trading companies such as Trafigura and Vitol will be involved in the logistics of transporting and selling Venezuelan crude on the U.S. market.

The change in destination for Venezuelan exports allows for a weighted price far superior to what the country received before the so-called "Great Energy Deal." In fact, the current weighted price is estimated at $50/bbl.

 

[1]: International Analyst
[2]: Nonresident Fellow, Baker Institute


 

2025, ANOTHER TYPICALLY ATYPICAL YEAR

El Taladro Azul

M. Juan Szabo [1] y Luis A. Pacheco [2]

Published  Originally in Spanish in  LA GRAN ALDEA    

The year 2025, the final year of the first quarter of the 21st century, emerged as a turning point in the global landscape, marked by geopolitical fragmentation, shifts in the world order driven by a new vision from Washington, conflicts proving difficult to resolve, and a pragmatic yet uneven energy transition in which fossil fuels defended their market position.

Global Geopolitics

Changes in geopolitical dynamics have accelerated, with confrontations between rival blocs—the West versus the China and Russia-led Axis—alongside some peace agreements, the most important of which appears destined to pacify the Middle East. Also in full development are the search for solutions to the Russia-Ukraine conflict and the Venezuelan crisis.

To date, though now relegated to the back pages of the news, the most significant outcome is undoubtedly the dismantling of the threat Iran posed had it succeeded in developing nuclear weapons. A well-designed campaign of attrition and a precise strike against Iranian power, its regional terrorism network, and its nuclear facilities by Israel and the U.S., met with indifference from other regional actors, has significantly restrained and delayed the Iranian nuclear threat. Meanwhile, sanctions have eroded Iran's capacity to finance its proxies that spread terrorism worldwide.

Energy and Markets

On the energy front, demand continues growing, driven by economic electrification, artificial intelligence (AI) requirements, and regional economic development. Geopolitics once again plays a leading role in conflicts over access to energy resources, transforming energy into a weapon of strategic influence.

In any event, due to numerous factors, oil prices have remained in a downward trend, losing nearly 20% of their value over the year. It is difficult to estimate how much of this behavior stems from President Trump's actions versus market forces. Still, the result aligns with his demands to limit inflation and motivate the Federal Reserve (Fed) and other central banks to stimulate economies.

Multipolarity and Tensions

The year 2025 consolidates an unstable multipolar world in which Trump's strategies and the reactions of his allies and adversaries revolve around three central themes: economic sovereignty, technological rivalries, and climate pressures as risk multipliers.

China, with its expansionist ambitions in the South China Sea, advances in AI, and control over strategic minerals, challenges U.S. dominance. The United States imposes secondary sanctions, limits exports, and takes other economic measures to halt China's post-pandemic economic recovery policies temporarily. A temporary "transactional agreement" is expected to mitigate domestic economic tensions. Still, fragmentation into commercial blocs with new "nodes" in India, Brazil, and Africa persists, raising the risk of "fiscal wars" and cyberattacks, with a geopolitical premium already reflected in gold prices.

Energy Transition

Energy in 2025 reflects the pursuit—thus far unsuccessful—of a balance between climate change mitigation policies and economic realities. Global greenhouse gas (GHG) emissions are projected to exceed 2024 levels; nonetheless, energy demand growth, driven by data centers and electrification, requires record investments in both fossil and renewable energy sources. The year will close with an energy mix in which fossil fuels still dominate, accounting for 78% of usage. The inconclusive outcomes of the COP30 conference in Brazil illustrate the complexity of the trade-offs between development and climate change.

Oil and Gas Demand

In this context, global oil demand grew by 1.2 million barrels per day (MMbpd), reaching 105.2 MMbpd by year's end, supported by petrochemical demand and growth in emerging economies. Natural gas demand grew 4% in the U.S., and, unlike oil, gas prices remained elevated due to sanctions on Russia, one of the largest producers, and rising demand for liquefied natural gas (LNG).

Energy Geopolitics

In summary, energy, as is well known, is the core of geopolitics. Conflicts such as Ukraine-Russia, instability, and military skirmishes have threatened fossil fuel supplies, while the race for critical minerals (lithium, cobalt, copper, rare earths) has fragmented supply chains, with China controlling 60% of their processing. Trump's energy policy prioritizes increased global production of oil and natural gas, as well as LNG exports, while tariffs delay the incorporation of imported renewables. Opportunities arise in alliances: BRICS countries push to break the dollar standard and the current economic order.

OPEC Strategies

In this context, OPEC and OPEC+ have been implementing strategies to maintain oil's relevance over time while balancing member countries' fiscal needs with the potential for demand destruction from excessively high prices. Threats of overproduction for 2026 continue to weigh on prices and represent the most critical factor to monitor in the coming months. The question we face is whether we are closer to "peak demand" than to "peak oil."

PRICE DYNAMICS

During the week, oil prices remained range-bound, though with some improvement. Markets weighed news of a possible increase in Russian oil exports, reduced CPC Blend exports from Kazakhstan, possible military action in Venezuela, rising U.S. inventories, and a possible Fed interest rate cut in December. The profound uncertainty surrounding the balance between demand and supply truncated the attempted price recovery. Nevertheless, at Friday's market close on December 5, the benchmark crudes, Brent and WTI, traded at $63.75 and $60.08/bbl, respectively, a 5% increase compared to the previous week's close.

VENEZUELA

Everything Collapsed

At the beginning of 2025, it appeared that the repercussions of fraud in the 2024 presidential elections had been contained and their significance diluted over time—just another episode in the long chain of political abuses by the Chavista regime. Control of prior years' hyperinflation led to talk of economic growth based on oil activity, supported by OFAC oil licenses granted to foreign operators such as Chevron, Repsol, Maurel & Prom, among others.

Policy Shift

But the winds changed direction. Donald Trump's arrival at the White House, Marco Rubio's appointment as Secretary of State, and pressure from Latino parliamentarians in Congress changed the dynamics of the relationship between Caracas and Washington.

The oil licenses granted by the Biden administration were canceled in their entirety. Although a new license was subsequently issued, this time privately and only for the American oil company Chevron, it has, as expected, provided only limited benefits to the economy, which remains constrained by the Maduro administration's restrictive policies.

Economic Crisis

This new sanctions scheme, together with falling international oil prices, slowly eroded foreign currency revenues; by year's end, the reduction reached 40% compared to the foreign currency entering at the beginning of the year. The foreign currency shortage, month by month, undermined the economic framework despite the efforts and sacrifices of economic actors. The government reduced public spending to mitigate Central Bank monetary financing, devalued the currency in a controlled manner, and attempted to suppress the parallel exchange market forcibly.

After months of adjustments and controls, the economy continues to contract. The bolivar has devalued 400% so far this year, and the gap with alternative dollar markets has surged again to 60%, despite the regime injecting increasingly large amounts of dollars into these markets at prices substantially above the official rate, currently at 258 Bs/$; it is estimated to reach 300 Bs/$ before year's end.

International Pressure

The possibility of a government change is increasingly mentioned, with even official sources discussing transitional proposals. It is rumored that in the much-touted phone call between Maduro and Trump, the latter gave Maduro a very short deadline to abandon his current position and, if he refused, he would "have to face the consequences"; still, Maduro characterized the call as cordial. Both pieces of information come from unofficial but apparently well-connected sources close to the centers of power.

International pressure on the Maduro administration is increasingly intense and escalating; it began early in the year with a policy of maximum oil and financial pressure, followed by legal proceedings in the U.S. through which Maduro and his closest acolytes were formally charged with narcoterrorism as kingpins of the Cartel of the Suns and the Tren de Aragua, and with maintaining relationships with Mexican cartels and armed terrorist gangs operating in Venezuela and Colombia.

Military Escalation

Subsequently, the U.S. escalated to the military pressure stage, deploying a naval force in the Caribbean, ostensibly to control drug trafficking. That force's actions have been eliminating vessels allegedly transporting narcotics. To date, approximately 23 boats have been eliminated along with more than 80 human casualties, and although these actions have been questioned in the U.S. Congress, they continue. In parallel, the U.S. fleet and its aircraft have escalated flights along the limits of Venezuelan airspace, and naval vessels have deployed radars in various parts of the Caribbean. Most recently, Trump declared Venezuelan airspace a no-fly zone, reducing commercial flights in and out of the country to a minimum. A situation of uncertainty, economic lethargy, and expectation has taken hold of the country.

Reflection

That Venezuela has gone from being a nation with a promising future and one of the natural allies of the United States in the hemisphere to the target of potential military action is something no Venezuelan can or should celebrate. It is a historical lesson in how an authoritarian regime, elected initially by popular vote, seeks and manages to isolate the country for the sole purpose of fraudulently remaining in power, at the expense of the present and future well-being of its citizens.

Future Prospects

On the other hand, most analysts continue to see significant oil growth potential in Venezuela if there is substantial political change. However, these same analysts differ on when and how this potential will materialize, both because of the complexity of implementing the necessary fiscal and institutional changes to attract massive investments and because of global supply-and-demand dynamics.

OIL OPERATIONS

Production

During 2025, production remained relatively unaffected by sanctions and license changes. Operational inertia and the use of service companies for well maintenance ensured relative continuity. Production during the year increased 4.5% according to OPEC secondary sources and remained constant, with a mid-year peak, according to our internal calculations. Both results indicate that current conditions are not conducive to materially increasing production, not even under the protection of the Anti-Blockade Law.

Refining and Petrochemicals

Refining, despite various repair and maintenance attempts, remained between 200 and 250 kbpd, representing less than 20% of installed capacity.

Petrochemical activity at the José complex has been a solid foreign currency generator both from product sales—methanol, ammonia, and urea—and from natural gas purchases; in fact, volumes processed have been limited by gas availability.

Accidents

Accidents were a regrettable and unsurprising constant throughout the year. The accident that occurred at the end of 2024 at the Muscar gas complex in the eastern part of the country kept natural gas and gas liquids availability limited throughout the year. Volumes of flared and vented gas also increased in northern Anzoátegui until August, when part of the gas was collected and injected into reservoirs. Accidents at the José complex and terminal have affected the integrity of upgraders and the handling of diluent imports necessary for Orinoco Belt production. A significant number of accidents in electrical transmission and distribution systems have affected economic activities in several regions of the country, including oil operations.

Marketing

In any case, hydrocarbon sales revenues were most affected by the political situation, limiting the markets and conditions under which Venezuelan crude could be placed. Indeed, during the suspension of OFAC licenses, all crude had to be sent to China, but through unorthodox mechanisms such as ghost tankers, intermediaries, ship-to-ship transfers, and sea-blending to relabel the crude's origin.

Since the new Chevron license took effect, approximately 130,000 barrels per day (kbpd) have been placed into the U.S. market. The rest is being sent to China with the described difficulties, except for a smaller volume sent to Cuba under notoriously opaque commercial conditions.

This export scheme yields weighted compensation well below the theoretical value of the crudes due to additional costs incurred and discounts that must be offered, given competition from other sanctioned crudes entering the same market.

Weekly Production

Finally, this week's production was similar to last week's due to the timely arrival of diluent from Chevron. Average weekly production was 859 thousand barrels per day, distributed geographically as follows:

• West: 232 (Chevron: 107)
• East: 117
• Orinoco Belt: 510 (Chevron: 127)
• TOTAL: 859 (Chevron: 234)
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CITGO

The lawsuit against the Bolivarian Republic of Venezuela, which began eight years ago in the courts of Delaware, U.S., finally concluded in November 2025 with an order to sell the shares of PDV Holdings, Inc., the parent company of CITGO Petroleum. This long and convoluted lawsuit started when the Canadian mining company Crystallex sued the republic for the Maduro administration's breach of the compensation payment agreement for the expropriation of its operations in Venezuela during Hugo Chávez's time.

Still, this is not the end of the saga. Execution of the purchase and sale agreement requires an OFAC license. Until then, the sale will remain pending. At the same time, Venezuelan parties have already filed with the United States Court of Appeals for the Third Circuit, which could suspend the sale order until appeals are resolved.

Both conditions—the OFAC license and the suspension—are essential, given the different timelines of the purchase and sale agreement and the transaction support agreement signed with PDVSA 2020 bondholders, who are also part of this transaction.

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[1]: International Analyst
[2]: Nonresident Fellow, Baker Institute