Donald Trump, the Factor Resisting Downward Pressure on the Oil Market

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

Despite projections of an oil supply surplus and uncertainty in the international financial environment continuing to push the oil market downward, barrel prices have been primarily driven by a strong geopolitical risk premium, which has pushed barrel prices higher over the past week.

As has become customary in this new normal, the administration of President Donald Trump is at the center of events. The U.S. president has begun his second year in office, facing internal judicial setbacks while escalating pressure on Iran, attempting to revitalize peace in the Middle East, and seeking to drive political changes in Venezuela, which in turn spill over into the rest of the region.

Oil recorded its largest increase since October as the market weighs whether nuclear talks between the U.S. and Iran will succeed in preventing an American military intervention with unforeseeable consequences.

Geopolitics

Geopolitics does not refer solely to armed or political conflicts between nations; in a country as large as the U.S., the world's largest economy, internal changes can trigger global effects. The Supreme Court's ruling on the legality of the tariffs the Trump administration has been imposing is one such case.

The Supreme Court Ruling

The United States Supreme Court has just blocked one of the most aggressive trade tools of the Trump administration in its attempt to restructure its trade balance, structural deficit, and global geopolitics; now, energy markets must decide what works and what does not.

In a split decision, 6 to 3, the Court struck down most of the sweeping tariffs imposed under the International Emergency Economic Powers Act (IEEPA), holding that the law does not grant the executive branch the authority to impose them. The same court's action eliminates the general tariffs of over 10% implemented since April 2025 and weakens the emergency argument used against Mexico, Canada, China, and other countries.

In any case, the sectoral tariffs on steel, aluminum, automobiles, and auto parts remain intact under separate trade statutes. The trade agreements reached with India, Indonesia, Taiwan, and Vietnam, in which this tool is used, are also considered achievements of the mechanism.

But the fiscal context has changed. Since February, Washington has collected nearly $300 billion in customs tariffs, 60% more than the previous year, with the effective rate rising from 3% to 13%. However, importers may be eligible for refunds exceeding $100 billion, as the court's decision could lead to legal action.

Nevertheless, not everything has been said yet, as Treasury Secretary Bessent warned: "The administration has several instruments in its toolbox." President Trump has already announced that, under Section 122 of the Trade Act of 1974, he will impose a 10% tariff, later raised to 15%, due to balance-of-payments concerns. Although this authority limits tariffs to 15% and their duration to 150 days without Congressional approval. In other words, it will give the administration less room to maneuver while it designs an alternative policy. The era of emergency tariffs as a trade cudgel is over.

Tension Between the United States and Iran

The relationship between the United States and Iran is in a period of heightened tension, characterized by a presidential ultimatum and a significant military deployment in the region. The aircraft carrier Gerald Ford and its support group are already in the Mediterranean Sea, having completed the "Absolute Resolve" mission in the Caribbean. President Trump has set a deadline of 10 to 15 days for Iran to accept a new nuclear agreement. While he maintains that he prefers to reach a negotiated solution, he has also indicated that he is considering the possibility of "limited military strikes" should Iran fail to make substantial concessions.

The Iranian regime has responded with a show of force, testing a new long-range missile in the Strait of Hormuz, the most critical bottleneck for the region's oil exports. At the same time, Foreign Minister Abbas Araghchi stated that Iran is "ready for peace" and will present a draft proposal in the coming days. However, Tehran has fortified its nuclear facilities in anticipation of a possible attack. Israel estimates that the probability of an agreement is very low and that a regime change would be most beneficial for the region.

Other Regional Conflicts

The conflicts in Ukraine-Russia and Israel-Gaza did not generate news capable of shifting the oil market's stance. The Russia-Ukraine peace talks (mediated by the U.S. in Geneva) were suspended prematurely without significant progress.

Trump convened on Thursday the inaugural meeting of his newly formed Peace Board, composed of more than twelve countries, at the headquarters of the International Peace Institute (IPI), where he unveiled financing pledges and outlined plans for the reconstruction of Gaza. This makes Gaza the first test of a new model of international governance, one that promises stabilization without resolving the question of political authority.

Market Fundamentals

U.S. crude oil inventories fell by 9 million barrels over the past week, according to data from the Energy Information Administration (EIA) published on Thursday, representing a 5% decrease compared to the five-year average. Gasoline and other petroleum product inventories behaved similarly, resulting in a total commercial inventory reduction of 19.1 million barrels. Given the magnitude and alignment with other data, this suggests an increase in demand, though we will need to wait to confirm the trend.

U.S. crude production has recovered and once again surpasses 13 million barrels per day (MMbpd) following shutdowns caused by winter weather. Drilling rig activity and hydraulic fracturing crews have remained steady.

OPEC+ maintains the expectation of initiating another cycle of production increases. Still, not all of its members have reached their assigned quotas, which also leads them to continue the overproduction narrative promoted by the International Energy Agency. The unknown, should the threat materialize, is whether Saudi Arabia, the UAE, and Iraq can increase output more than the declines from other members; therefore, a redistribution of current quotas is not ruled out.

There is a realignment in Russian crude oil purchases between India and China: India is negotiating with the U.S. to purchase Venezuelan crude instead of Russian crude. The Chinese would be acquiring Russian crude that was left without a destination at a discounted price. These movements do not affect the international oil market, though they do impact Russia's revenue levels.

In general, economic activity is supporting the increase in global oil demand, and this is what must be focused on. Over time, supply, primarily in Brazil, Guyana, Argentina, and Canada, tends to grow, but does not reach the projected surplus volumes of 2 to 4 MMbpd.

Crude Oil Prices

Since mid-February, prices have experienced a geopolitics-driven rally, albeit with minor corrections during lower-tension sessions. The main catalyst has been the escalating tensions between the United States and Iran, including Iran's internal problems and its repressive policies against its own population.

The year-to-date price increase is notable and virtually reverses the declines of 2025. In fact, geopolitical risks have injected an estimated $3-$5-per-barrel premium, without a counterweight from fundamentals, due to uncertainty over production forecasts.

Against this backdrop, benchmark crude Brent and WTI were trading at $71.76/BBL and $66.48/BBL, respectively, at market close on Friday, February 20, 2026, up nearly 6% from the previous week's close.

VENEZUELA

A Supervised Economy Toward Political Transition?

Although the strange has become routine in Venezuela, one cannot help being surprised that a regime that until recently was part of an "anti-imperialist revolutionary" axis now appears to be moving to Washington's tune on economic and political matters. The past week has been marked by new attempts at political and economic reconfiguration that, while still tentative, offer some hope to a population that, for the moment, is little more than a spectator of the political farce.

On the economic front, efforts continued to control the foreign exchange market through more predictable currency flows authorized by the U.S. Treasury. Meanwhile, renewed interest in oil sector investment promotion is evident, particularly following OFAC's issuance of new licenses.

On the political front, after some stumbles, the Amnesty Law was approved, and efforts continued to demonstrate a slow willingness to reduce the number of political prisoners and grant full freedom to some key figures from the so-called true opposition.

Visit from U.S. Southern Command

But perhaps the most surprising event was the visit to Caracas on February 18, 2026, by General Francis L. Donovan, head of U.S. Southern Command, and Acting Deputy Secretary of Defense for the Western Hemisphere, Joseph Humire. Accompanied by Ambassador Laura Dogu, they met with officials from the interim government, including Acting President Delcy Rodríguez, Defense Minister Vladimir Padrino López, and Interior Minister Diosdado Cabello. One can only speculate about the discomfort that Venezuelan authorities must have felt receiving the commander of the military forces that removed Nicolás Maduro and his wife less than two months ago. But the fact that no photos of the meeting were published should give us some clue.

Ostensibly, the purpose of the visit was to discuss the stabilization of the country and the implementation of President Donald Trump's three-phase plan for Venezuela. There is talk of establishing bilateral cooperation mechanisms in the fight against drug trafficking, terrorism, and migration, as well as overseeing U.S. military personnel assigned to secure the diplomatic premises in Caracas. Once again, a demonstration of the subservience that appears to have been established between the regime and the U.S., which, as a country, is deeply embarrassing, even if it proves useful for moving forward.

Economic and Exchange Rate Situation

On the economic front, auctions were held for $300 million in currencies received from controlled accounts, but the process encountered operational issues due to "compliance" requirements imposed by U.S. entities. The auctions were settled at prices close to the parallel market rate, generating sufficient bolivars to meet budgetary needs. The gap with the official rate remained around 40%, and the narrowing of this gap is being carried out gradually to benefit from what is indexed to the official rate (Official: Bs 405/$ and Parallel: Bs 570/$).

Oil Licenses and Contracts

The French company Etablissements Maurel & Prom S.A. was added to the OFAC operating license (LG 50A), and rumors suggest that several CPP contracts approved under the anti-blockade law will be rescinded, likely due to the inability of those involved to obtain such licenses. We understand that contracts for joint ventures (JVs), in which "B" partners will be the operators, will have no obstacles in meeting the requirements of the new Hydrocarbons Law (LOH), since by agreeing on the recovery scheme for outstanding debts with PDVSA and an income tax (ISLR) rate of 34%, negotiations on royalty levels and integrated tax will not be necessary, thereby eliminating much of the existing discretionality.

Based on these contracts—JVs and CPPs, now licensed and signed within the applicable 180-day deadlines from the publication of the new LOH—we reiterate our production projections for the next 22 months: 1.1 MMbpd by end-2026 and 1.4 MMbpd by end-2027.

In a separate note, Citgo (a PDVSA subsidiary) and Phillips 66 applied to OFAC for licenses to purchase Venezuelan crude without going through "traders."

Amnesty Law and Political Situation

In the political arena, the approval of the Amnesty Law is considered a positive step by some. However, it is noted that the approved law leaves much to be desired and is undoubtedly aligned with a regime strategy to perpetuate social control. The use of the term "pardon" in the narrative of all regime officials is an example of the regime's limited intention to pursue peace. The concept of "amnesty," by definition, involves nullifying legal liability for alleged crimes, whereas a pardon is a state act of grace for an actual crime. Furthermore, it leaves the door open to accusing those currently granted amnesty of other supposed offenses.

Furthermore, the law excludes groups that should be covered, such as imprisoned military personnel. The National Assembly established a special commission to implement the Amnesty Law, clearly in reference to the handling of those excluded. National Assembly President Jorge Rodríguez spoke of reviewing precautionary measures against 11,000 citizens, giving an indication of institutional repression as a form of governance.

Unlike the economy and oil sector, political "guardianship" appears lax.

Unconfirmed for now, there are reports that the U.S. is demanding the Delcy Rodríguez regime hand over 9 individuals wanted by U.S. justice; the group includes Alex Saab and Raúl Gorrín. Another unexpected piece of news was a consular visit to Nicolás Maduro and Cilia Flores in New York, authorized by the presiding judge.

Oil Operations

Intense activity is perceived as related to the increase in oil operations by Chevron and Repsol and service companies in the first instance, followed by activities related to Maurel & Prom and others that may receive OFAC licenses. Shell, the Anglo-Dutch company, is, on the other hand, trying to accelerate development activities at the Dragon Field, offshore Venezuela, to supply natural gas to Trinidad—a long-delayed project.

Production and Export Data

Oil production in some fields recorded modest growth. Production for the past week totaled 885 Mbpd, distributed geographically as follows:

·       West: 245 Mbpd (Chevron: 102 Mbpd)

·       East: 112 Mbpd

·       Orinoco Belt: 528 Mbpd (Chevron: 137 Mbpd)

TOTAL: 885 Mbpd (Chevron: 239 Mbpd)

National refineries processed 210 Mbpd of crude and intermediate products, yielding 75 Mbpd of gasoline and 67 Mbpd of diesel.

Exports continue on track to average more than 700 Mbpd, with Chevron increasing its share to 270 Mbpd. The first Venezuelan crude cargo arrived at the Bilbao refinery in Spain.

The increase in international prices, partially offset by a wider light-heavy differential, brought the Venezuelan basket to $56.7/BBL.

 

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

IEA vs. OPEC: The Market Chooses Pessimism

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

The International Energy Agency (IEA) has once again undermined the oil price floor with its latest report. The report projects, on the one hand, a significant supply surplus for the year and, on the other, a reduction in demand.

These demand and supply forecasts directly contrast with the monthly report published by OPEC, but the market used the preponderance-of-evidence mechanism—that is, it assumed the optimistic case was weak and that barrel prices would weaken.

Indeed, OPEC's demand/supply forecasts may be more encouraging, but they were overshadowed by rumors that the global cartel, OPEC+, was leaning toward placing additional crude on the market starting in April, which also coincided with a larger-than-expected increase in U.S. commercial inventories, according to the Energy Information Administration (EIA).

Munich Security Conference

On the other hand, U.S. Secretary of State Marco Rubio's statements at the Munich Security Conference had a significant impact. Rubio presented a conciliatory but firm stance, inviting Europe to align with the Trump administration's vision on tariffs, immigration, and security. The U.S. official emphasized that the U.S. wants allies who can "defend themselves" so that no adversary tests NATO's collective strength. He also expressed the importance of defending the values that had fostered the successful transatlantic collaboration.

Similarly, German Chancellor Friedrich Merz revisited past mistakes, particularly complacent policies in the face of environmental pressures, which he addressed with "crude realism," and described a strategic shift for Germany. Both diplomats agreed that the "Post-War World Order" was no longer applicable.

Market Fundamentals

Despite widespread predictions of overproduction, global supply, based on information from OPEC and producers themselves, barely grew in January, largely due to OPEC+ underproduction of nearly 400,000 barrels per day (400 Mbpd). The only countries that met their quotas were Saudi Arabia, the United Arab Emirates (UAE), Kuwait, and Iraq. The production increase in Brazil, Argentina, and Guyana in January was about 240 Mbpd, which, together with contributions from the U.S. and Canada, did not offset the decline from OPEC+ countries.

The unusual increase in U.S. commercial inventories of 8.5 million barrels, far from being taken as an indicator of falling demand, results from the fortuitous combination of higher imports and lower crude exports, along with a lower level of domestic refining. Meanwhile, favorable economic results in the U.S., such as reduced inflation, higher-than-expected job creation, and a reduction in unemployment from 4.7% to 4.6%, were overlooked in the weighting done by oil market actors.

Short-term demand for Saudi Arabian oil in China is soaring after the Kingdom earlier this month reduced its official selling prices (OSP) for Asia to the lowest level relative to regional benchmarks in more than 5 years. The Saudis are eager to increase their market share in the world's leading importing region, amid assumptions of global oversupply and the steep discounts at which Russian oil is sold in China.

Thus, during the week, the oil market has been very selective about the information shaping its perception and, clearly, on the fundamentals side, has chosen the somewhat pessimistic IEA projections on demand growth for 2026, reducing demand by 80,000 barrels per day compared to its forecast a month ago. Likewise, it is being carried away by IEA supply forecasts that clearly exceed, at least, the realities of January 2026.

Geopolitics

The oil market is going through a phase of volatility, marked by a struggle between geopolitical risks to supply and the threat of a global supply surplus. Tensions between the U.S. and Iran have reintroduced a geopolitical risk premium, somewhat reduced since diplomatic negotiations began, which so far have had no success. The presence of two U.S. aircraft carriers and their support group in the Middle East is a message that always moves political risk indicators. The mere announcement of the Gerald Ford aircraft carrier's deployment from the Caribbean to the vicinity of Iran, by itself, puts the region on incremental alert.

On the Russian-Ukrainian front, diplomacy and pressure have achieved little; the conflagration continues without expectations of significant change (1,450 days). The Russians are focused on affecting Ukraine's energy infrastructure: hundreds of people have died from hypothermia. Meanwhile, Ukrainians have returned to their drone attacks on Russian refineries: this time it was the Volgograd refinery that had a total shutdown after suffering a fire caused by drones.

The other issue that tends to affect somewhat disproportionately is news about OPEC+ internal deliberations, suggesting that some countries, such as Saudi Arabia and the UAE, prefer to resume oil production increases starting in April 2026. The decision would be made at the end-of-March meeting, but the news, though unconfirmed, generated negative sentiment, especially given the IEA’s continued projection of a production surplus of around 3 million barrels per day in 2026.

In summary, geopolitics has exerted mixed pressure on the oil market, acting as a counterweight to signals of weakness in global demand.

Crude Oil Price Dynamics

Rumors, announcements, and reports from OPEC, IEA, EIA, and news agencies managed to disorient once again the perception of the oil market, which is already predisposed to react to any news, and capitulates once more under the pressure of numerous projections, exaggerated in our opinion, of growing supplies and limited demand. Crude oil prices have suffered a significant decline, retreating nearly 3% mid-week, which brought prices below the previous week's close.

Thus, the Brent and WTI marker crudes, at market close on Friday, February 13, 2026, traded at $67.75/BBL and $62.89/BBL, respectively, reflecting a minor 0.4% reduction from the previous week.

VENEZUELA

Democratic Transition or Directed Auction

There is little doubt that the stabilization and recovery stages outlined by Secretary Marco Rubio during one of his appearances before the U.S. Congress overlap. In the whirlwind of events occurring in the Latin American country, it is difficult to distinguish which steps or measures belong to which stage.

New Oil Opening

The fact is that the hydrocarbon industry remains the main protagonist in the relationship between the White House and the Venezuelan regime. The "express" reform of the Organic Hydrocarbons Law has been followed by the issuance of OFAC licenses (GL 46, GL 49, GL 50), whose explicit purpose is to pave the way for U.S. and other countries' companies to contract with the Venezuelan State to operate in Venezuela's oil sector.

This rushed and, clearly, poorly structured "neo-oil opening" was reinforced during the week with the visit of U.S. Energy Secretary Chris Wright, the highest-level U.S. official to visit Venezuela in many years.

Visit of Energy Secretary Chris Wright

The visit, carefully choreographed to satisfy both parties' expectations, began in Caracas with meetings at the Miraflores Palace and was followed by a visit to oil operations and the signing of long-term energy cooperation agreements, evoking the Chinese-Venezuelan agreement from a couple of decades ago, without direct financing but with alternative financial mechanisms such as Exim-Bank.

The operational areas chosen for the visit were the PetroIndependencia production field, in the Orinoco Belt, operated by Chevron and whose development is of recent date. Most of the wells and infrastructure were drilled and built in the last 24 months; it is perhaps the only field in the country with such conditions.

So Secretary Wright, an expert in shale oil development, saw surface facilities at PetroIndependencia (pads, tanks, lines) that had nothing to envy of Permian Basin operations in Texas, even though the subsurface is very different. They also visited the PetroPiar crude upgrading facilities in José, on the Caribbean coast, operated by Chevron. It should be noted that of the 4 upgraders installed at the José Complex, PetroPiar's is the only one in operation.

Although Wright and his entourage, like the facility operators, wore the mandatory safety clothing and equipment, Ms. Rodríguez broke the rules, perhaps because no one dared to call her attention to it.

Assignment of New Oil Blocks

Meanwhile, operations throughout the country continued normally, and it was announced that, under the protection of the new Hydrocarbons Law, additional blocks would be granted to the companies Chevron, Repsol, and Maurel & Prom. The mechanism or legal justification for assigning new areas is not very clear and evidences one of the most important shortcomings of the new legislation, which, as many have pointed out, has a worrying discretionary component.

Also, the Shell and BP companies benefit from the new OFAC licenses (GL 50), although these are related to offshore natural gas developments: 1. Dragón in northern Paria to be supplied to Trinidad to fill the liquefaction plant now operating at half capacity, and 2. for the development of shared deposits on the Deltana Platform (southeast of Trinidad).

Economic and Exchange Rate Stabilization

The most important impact of the oil export stabilization process has been the flow of foreign currency through the mechanism overseen by the U.S., whereby about $500 million enters the country each month, part of which the BCV auctions, maintaining some control over the foreign exchange market, something it had completely lost last year. In contrast, money trading desks handle relatively smaller amounts of foreign currency, which will change when Chevron and, eventually, other private oil companies begin to operate as they did under general license 41 in 2024.

Likewise, a recovery in public spending and stabilization of monetary financing are observed. All this, obviously, is the result of a better-weighted price for the Venezuelan basket, which for January and so far in February approaches $50/BBL, a marked contrast to what was obtained last year.

Perspectives on Production and Elections

It was noteworthy that, in interviews following the visit, Wright mentioned that, in addition to being able to increase production by 40% this same year, which is clearly perhaps too optimistic, he also agreed with María Corina Machado in the appreciation that free and democratic elections could be held in a relatively short time.

A poll of Venezuelans, published in the Financial Times, revealed that 70% of respondents think things are improving, approximately the same percentage that would vote for MCM if there were elections.

Amnesty Law and Release of Political Prisoners

As for the much-announced Amnesty Law, its progress and spirit have not been very flattering. Despite certain democratic gestures in the National Assembly, while listening to opinions from jurists, NGOs, and universities, among others, differences and grudges from the past surfaced, and the law's approval was postponed. Even the "opposition to the regime" bloc strongly opposed hardline Chavista suggestions that those amnestied should first recognize their crimes before benefiting from amnesty. This approval could become complicated.

The release of political prisoners also does not have the same speed or, perhaps, the same U.S. push as oil events; in particular, very few military political prisoners have been released.

In the territorial order, the Venezuelan army has begun displacing the Colombian guerrilla toward Colombia, probably another request originating in the north.

Oil Operations

It was reported that an oil tanker was boarded and seized in the Indian Ocean after evading the American quarantine around Venezuela. It is the tanker Aquila II carrying 700,000 barrels of Merey crude, allegedly destined for China.

Oil production remained stable last week, with a discrete increase from Repsol in the West offset by a similar reduction from operator Concord in Lake Maracaibo due to an accident involving its drilling rig, which warranted closure.

Production and Export Data

This week's production was 878 Mbpd, geographically distributed as follows:

-   West: 252 Mbpd (Chevron: 102 Mbpd)

-   East: 112 Mbpd

-   Orinoco Belt: 514 Mbpd (Chevron: 134 Mbpd)

TOTAL: 878 Mbpd (Chevron: 236 Mbpd)

In domestic refineries, 203 Mbpd of crude and intermediate products were processed, yielding 72 Mbpd of gasoline and 65 Mbpd of diesel.

February exports appear to maintain the same level as January. Extrapolating from the first half of the month, an export rate of around 740 Mbpd could be achieved, including diluent, without inventory contributions. Chevron is projecting to export 250 Mbpd to the U.S. A shipment of nearly 2.0 million barrels departed for India.

Venezuelan basket prices have remained at $54/BBL.

[1]: International Analyst

[2]: Nonresident Fellow Baker Institute

A MARKET SPECULATING ON GEOPOLITICS

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA

 

To see the oil market react to unfolding events, sometimes in contradictory ways, should not be a surprise. After all, the market trades not only on fundamentals but also speculates on expectations, whether well-founded or not.

During the now-elapsed first week of February 2026, the market experienced a trend reversal after reaching six-month highs. Driven by signs of geopolitical de-escalation, prices recorded their first weekly decline in 7 weeks. However, late on Friday, the market rebounded after the first round of talks between the U.S. and Iran stalled, and additional sanctions were imposed on tankers and companies involved in Iranian crude exports.

Russia-Ukraine Peace Negotiations

In the same vein, the Trump administration is maintaining economic pressure on the Kremlin to accept a negotiated solution with Ukraine. The White House has set the ambitious goal of achieving a peace agreement between Russia and Ukraine by March. During a second round of trilateral peace talks in Abu Dhabi this week, there were no signs of progress, although an exchange of 314 prisoners of war was concluded, the first of its kind since October.

Ukrainian President Volodymyr Zelensky told reporters on Saturday that the United States had proposed a new round of talks in Miami within a week, to which Kyiv had agreed. According to Reuters, if an agreement is reached, it would be submitted to a referendum by Ukrainian voters, who would vote simultaneously in a national election, according to anonymous sources.

Cautious Forecasts for 2026

Despite the many geopolitical uncertainties, the Energy Information Administration (EIA) and some major banks are being cautious about oil for the coming year; they observe the fundamentals (rising inventories and moderate geopolitical risk) and continue to forecast prices averaging below $60 per barrel in 2026; according to the EIA, the increase in crude oil production and the rise in oil in floating storage outweigh the effect of potential disruptions in oil exports driven by tensions in Russia and Venezuela.

Global Production and Supply Factors

In the U.S. and Canada, oil production remains affected by winter shutdowns. At the same time, the increase in rig activity reported by Baker Hughes is concentrated exclusively in the natural gas sector, driven by seasonal demand. Minor contributions from Russia and Mexico to the global oil supply serve as a mitigating factor against the projected overproduction in the first half of 2026. In particular, Russia could be affected by India's decision to substitute Russian crude with Venezuelan crude and by the reduction of the Russian oil "price ceiling" to $44.1/BBL in February, a measure aimed at reducing Russia's oil revenues and intensifying pressure on its exports.

Global Demand Behavior

In this regard, crude purchases by China continue to show a modest uptick, driven by the central government's interest in boosting product exports and strategic inventories. India's demand maintains its forecasted growth, while increases observed in the Middle East and Latin America bring demand closer to OPEC's forecasts than to those of the International Energy Agency (IEA).

Price Volatility

The intersection of overproduction projections and the changing dynamics of geopolitical activity led to a weekly decline in oil prices, though a Friday rally was interrupted by the weekend closure. This volatility is largely attributed to the start of nuclear energy talks between Iran and the U.S. in Oman, which reduced fears of supply disruptions from the Middle East and lowered the geopolitical risk premium that had driven prices. However, that trend reversed upon learning of the meetings' failure.

As things stand, the Brent and WTI benchmark crudes, at the close of markets on Friday, February 6, 2026, were trading at $68.05/BBL and $63.55/BBL, respectively, reflecting a reduction of around 1.8% compared to the previous week.

Note: at the close of Monday, February 9, Brent crude was recovering, with gains of nearly 1.7% for the day.

CUBA

After Maduro, Cuba?

On this side of the world, the situation in Cuba has reached a critical point, with international warnings of a possible economic and humanitarian collapse. In 67 years since the Castro insurgency, numerous predictions have projected the end of the Cuban revolution. Still, time and again, the Cuban regime has shown its resilience and, despite having become a practically unviable country, through repression and social control, the regime survives, albeit seriously weakened.

Energy and Humanitarian Crisis

The UN warned that the Caribbean country faces collapse if it fails to meet its energy needs, particularly for oil. Supply from Venezuela was interrupted in January following the capture and extraction of Nicolás Maduro, and Mexico, which had been supplying part of the demand, also recently stopped its exports to the island.

Blackouts on the island exceed 20 hours daily in many areas, affecting vital services such as hospitals, water pumping, and food refrigeration. Cuba's electrical sector faces a significant deficit, often exceeding 1,800 megawatts, due to aging infrastructure, fuel shortages, and inadequate investment. The government implemented a four-day workweek, reduced working hours, and offered online university classes to conserve energy. Recently, the Cuban government announced that there is no aviation fuel, which could worsen the shortage of goods.

Search for Solutions

The accumulation of decades of mismanagement, ideology, corruption, and the U.S. blockade has left the Cuban State at its most vulnerable moment since the triumph of the Revolution in 1959 and with very limited options. Indeed, there is already talk that Cuba's president, Díaz-Canel, is seeking a negotiated solution to the situation and has initiated secret meetings with the U.S. in Mexico.

VENEZUELA

Changes and Internal Conflicts... and the Transition?

Economic Stabilization and Petroleum Cash Flow

After an unthinkably dynamic January politically, Venezuela continues to surprise, some surprises welcome and others not so much. In the economic sphere, the late 2025 oil quarantine, followed by the removal of Maduro and his wife, was closely followed by the reorientation of Venezuelan crude sales to premium markets under U.S. government "tutelage," which enabled the establishment of a protected cash flow controlled by the U.S. Treasury. Foreign currency proceeds from these exports have entered the BCV and been auctioned in the foreign exchange market, partially mitigating the bolívar's devaluation and slowing the uncontrolled growth of inflation.

January exports ended up in the U.S. market, but in February, we see a diversification of destinations towards Asia and Europe. Indeed, India's largest private refinery, Reliance Industries, is again buying Venezuelan crude: 1.9 million barrels will be shipped from the José terminal in February. Likewise, Repsol formalized a barter of Spanish diluent for Venezuelan crude.

Hydrocarbons Law Reform

Also, in a rushed manner, a reform to the Organic Hydrocarbons Law was presented, discussed, and approved in the National Assembly (AN). The liquid hydrocarbons law reform has been widely analyzed by jurists and oil analysts, laypeople and experts, and most agree in characterizing it as a much less statist law and more attractive for private investment, but with important limitations regarding the participation mechanisms allowed and, above all, with great discretion granted to the executive branch that would give opacity to the contracting and flexibilities that the law establishes for present and future investors.

The maximum "Government Take" under the new law is considerably lower than the nearly 90% under the 2006 Law. However, in each case, negotiations to reduce that burden depend on executive discretion and therefore take away formality and solidity from the contractual offer.

It is worth noting that, unlike most legislation worldwide, the "restoration of the original economic balance," a concept introduced by the approved reform, is an obligation of the executive rather than a prerogative. In any case, a new law will probably be required for Venezuelan hydrocarbons to be competitive and provide the legal security necessary to attract the massive investments required for the country's development.

New Licenses and Investment Expectations

We understand that, as a result of this new legislation, OFAC has received some requests for licenses to operate in Venezuela from OFA. We believe OFAC may be considering issuing a general license, like LG46, covering primary activities (exploration and extraction). Based on this accelerated process, the interim government has met with Repsol and Maurel & Prom, and expectations of increased oil activity have emerged.

Another aspect, little commented on but, in our opinion, worrying, is the "express" formalization of the many contracts concluded under the so-called "anti-blockade law." Contracts granted, by definition, with much opacity, and that would not only control an important part of quality reserves but also limit a new administration's capacity to restructure the oil industry optimally.

Political Dynamics and Transition

In the political sphere, things have also moved at a dizzying pace. The United States chargé d'affaires, Laura Dogu, met with the Rodríguez brothers upon her arrival in the country and promised to work for Venezuela's development. For its part, the AN began discussions on the Amnesty Law, a complex law that, like everything in this situation, could become a double-edged sword.

Rumors persist of disagreements between the Rodríguez brothers and Diosdado Cabello, but the matter has not been confirmed. It was also reported that Alex Saab and Raúl Gorrín had been detained, according to various media outlets, including Reuters, and that their whereabouts are unknown.

The process of releasing political prisoners continues, albeit slowly; Jorge Rodríguez visited the families of inmates in Zone 7 in Boleíta and promised that all would be free next week. It later turned out the event had been a propaganda stunt. The re-imprisonment of opposition leader Juan Pablo Guanipa, less than 24 hours after his release from prison, demonstrates the fragility of the regime's promises and evidences its intention to continue inducing unease in the population.

Venezuelan leader María Corina Machado, for her part, indicated that she wants to return to Venezuela and thought it was possible to hold elections before the end of the year. We think her return would be part of a concerted strategy with the White House to activate the population and energize the political transition from within the country.

Although it had been reported that U.S. Energy Secretary Chris Wright was in Venezuela on Friday to review oil activity, the visit, at the time of writing this note, remains uncertain.

Despite the rapid and multiple changes designed to stabilize the economy and restore oil activity, described as the first two phases of the Marco Rubio Plan, no activity aimed at promoting the political transition to democracy is known... for now. The changes that have occurred have given the impression of a relaxation of repression, judging by the incipient union protests, calls for student protests, and the release of important opposition figures.

Petroleum Operations

Oil production tends towards normalization and even shows a slight uptick as some companies prepare to obtain OFAC licenses. In particular, Chevron is already shipping larger volumes to the U.S.

Reuters reported at least one land rig departing from the port of Houston bound for Maracaibo.

Production and Export Data

This week's production was 875 Mbpd, geographically distributed as follows:

-   West: 251 Mbpd (Chevron: 104 Mbpd)

-   East: 112 Mbpd

-   Orinoco Belt: 512 Mbpd (Chevron: 131 Mbpd)

TOTAL: 875 Mbpd (Chevron: 235 Mbpd)

At national refineries, 212 Mbpd of crude and intermediate products were processed, yielding 76 Mbpd of gasoline and 62 Mbpd of diesel.

February exports appear to maintain the same level as in January. If a monthly export of 840 Mbpd were achieved, Chevron would export 30% of the total.

We estimate the Venezuelan basket price has remain

OVERSUPPLY FEARS MITIGATED BY GEOPOLITICAL TENSION

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA

 The oil market concluded January 2026 with an unexpected price increase, thus recording its first positive monthly balance in the last six months. This result occurs despite forecasts of a supply surplus for the year and, in apparent response, to decisions by producing countries to maintain control over their production, factors that have significantly influenced market sentiment in the final days of the month.

 

The market remains nervous about the possibility of a U.S. attack on Iran, which has reinforced the supply risk premium. Additionally, the capture of Nicolás Maduro in Venezuela in early January and the evolution of the situation in Caracas, detailed in the corresponding section, have generated uncertainty about supply in the hemisphere. The bullish sentiment was also reinforced by the fact that U.S. supply remains affected by winter storm Fern, which reduced crude production by more than 500,000 barrels per day (500 Mbpd).

 

OPEC+ Decisions

OPEC+, led by Saudi Arabia and Russia, reaffirmed its November 2025 decision to pause production increases during the first quarter of 2026 to avoid market saturation. At the same time, OPEC+'s Joint Ministerial Monitoring Committee (JMMC) reviewed crude oil production data for November and December 2025. It noted general compliance by OPEC countries and non-OPEC countries participating in OPEC+. This stance is expected to help counter the International Energy Agency's (IEA) forecasts, which predict a record surplus of up to 4 million barrels per day for this quarter.

 

Ukraine Conflict

U.S. President Donald Trump announced this past Thursday that Russian President Vladimir Putin has accepted a temporary cease-fire in the periodic bombings that destroy Ukraine's energy system, in the middle of winter. This would be an agreement between the parties in conflict to suspend attacks against their respective energy infrastructures, but differences arose over the moratorium's timeframe. Uncertainties about the next step in talks to end the nearly four-year war remain unresolved.

 

Impact on Cuba

A not entirely surprising situation is occurring in the geopolitical sphere of the American hemisphere as a consequence of developments in Venezuela. The conditions imposed by the U.S. for managing Venezuelan exports do not allow the shipment of crude or products to Cuba. Other potential suppliers, such as Mexico, have disengaged from meeting Cuban demand in the face of threats of additional tariffs being imposed on their exports to the U.S. So Cuba finds itself between a rock and a hard place: the "rock" is the internal political and economic crisis and the lack of foreign currency. In contrast, the "hard place" is the tightening of the external siege—a serious situation to watch closely.

 

Price Behavior

In light of all these events, prices rebounded as the market tried to understand President Trump's shifting rhetoric, who first promised "fast and violent" action against Iran and then spoke of dialogue, adding volatility to the upward trend during the week. The gradual return of suspended production in Kazakhstan did not prevent Brent crude from breaking through the $70/BBL ceiling, albeit temporarily.

 

In any case, Brent and WTI benchmark crudes, at the close of markets on Friday, January 30, 2026, were trading at $69.32/BBL and $65.21/BBL, respectively, reflecting an increase of more than 5% from the previous week and almost 15% higher than the close of 2025.

 

At the close of this note, the week's gains were on track to disappear, showing the market's high volatility and the uncertainty of the geopolitical situation.

 

VENEZUELA

Haste Makes Waste

Less than a month ago, the Venezuelan regime sold itself as the paradigm of a 1960s revolution, with an anti-imperialist discourse in which the U.S. was the devil (Chávez dixit). The relaxation of economic sanctions and the change of administration following the capture of Nicolás Maduro on January 3, 2026, have drastically transformed the situation and, as a consequence, have changed the flow of Venezuelan crude exports in the short and medium term, but that is only part of the changes occurring under the "tutelage" and/or pressure of the Trump administration.

 

Stabilization and Recovery Phases

Indeed, the Trump government’s Stabilization and Recovery phases are being implemented in tandem. The reorientation of export destinations toward the North American market has already begun to generate a sufficient flow of foreign currency to halt the devaluation rate of the Venezuelan monetary unit. However, it must be noted that administrative issues in managing the last $200 million affected the auction schedule, widening the gap between exchange markets again.

 

The continuity of these mechanisms could result in a form of exchange rate stabilization, as occurred in 2024, and lead to a recovery in consumption levels.

 

Plans to export more crude volume to markets with better prices by suspending shipments to Cuba (until now sent free or almost free) and to China (pending debt service) will materially increase the amounts received from hydrocarbon sales. However, Chinese debt service will require particular arrangements and negotiations.

 

Reform of the Organic Hydrocarbons Law

On the political side and with a speed never before seen in the history of national parliaments, the Partial Reform Law of the Organic Hydrocarbons Law was approved unanimously and sent to the acting president for signature and publication in the Official Gazette.

 

Following the announcement of the law's approval in the National Assembly, OFAC issued a general license, GL 46, which essentially suspends sanctions applicable to U.S. actors and allows the export, refining, storage, marketing, and transportation of Venezuelan crude and products. These formalizing operations were already taking place.

 

For many analysts, the new Organic Hydrocarbons Law (LOH), with the approved modifications, ends the cycle of the nationalized industry that began on January 1, 1976, with the entry into force of the Organic Law that Reserves to the State the Hydrocarbons Industry and Marketing (LOREICH). The new law allows the primary activities of the hydrocarbons industry (exploration and production) to be carried out by private entities, even through contracting, in the case of Joint Ventures (JV). JVs and PPCs (productive participation contracts) will have 180 days to adapt to the terms established in the new law.

 

In any case, most improvements regarding the reduction of royalties and comprehensive taxes, the rights to market crude, and the determination of the income tax level applicable to each business involve a high degree of executive discretion. The discretionary element will limit the country's appeal to new companies considering investment. However, it may encourage companies already in the country that are recovering funds owed to them by PDVSA to continue their programs and even agree to additional investments. Incidentally, control and approval by the National Assembly over new contracts are eliminated: only the business details will have to be reported; in other words, the process is the exclusive power of the executive branch. According to the new law, operating companies will pay royalties, the integrated tax, and income tax to the state company that will act as the Treasury's agent.

 

However, the new model is not without tensions. Doubts persist about its constitutionality, especially regarding public interest contracts, international arbitration, and the elimination of parliamentary control, among other issues. Additionally, the new law maintains broad discretion in the Executive's hands, introducing uncertainty about the transparency and legal stability of the rules of the game.

 

Operating Licenses and New Investments

We understand that Chevron has a new OFAC license that more closely resembles General License 41 (GL41) granted to them by the Biden Administration, and that Chevron tankers are loading crude at Venezuelan terminals. Still, this increase in dollars has not yet manifested at exchange desks.

 

U.S. Secretary of State Marco Rubio announced that Venezuela will present a monthly foreign currency budget to determine the flow of foreign currency from controlled accounts to Venezuela. This reinforces the message of supervised government that Caracas wants to minimize.

 

In light of these changes, British oil majors Shell and BP, which had already been working with the regime, are seeking U.S. licenses to develop gas fields in Venezuela and shared deposits between Venezuela and Trinidad and Tobago, which, in any case, are governed by the Organic Law of Gaseous Hydrocarbons.

 

Changes in the Political Sphere

In the political sphere, things are happening with the same haste. On January 30, 2026, Venezuela's acting president, Delcy Rodríguez, announced sending a General Amnesty bill to the National Assembly. This measure seeks, among other things, the release of hundreds of political prisoners and the definitive closure of gloomy detention centers, such as El Helicoide, which would be transformed into a social center. The proposed law intends to cover political confrontation events that occurred between 1999 and the present, excluding serious crimes such as murder and human rights violations. It is worth remembering that in 2019, the National Assembly, with an opposition majority, had enacted an Amnesty Law, but it was declared unconstitutional by the Supreme Court, controlled by Chavismo. Different winds are blowing through the corridors of power.

 

Foro Penal, a Venezuelan NGO, reported on February 1 new releases in Venezuela, bringing the total to 310 cases since January 8, when it was announced that a "significant number" of detained people would be released. However, the figure remains far from the more than 800 reported by the authorities.

 

The Bolivarian Armed Forces recognized Delcy Rodríguez as commander-in-chief, apparently an unprecedented detail for an interim president, of which there haven't been many either. Could this be an indication of Maduro's permanent absence, paving the way for elections?

 

Meanwhile, María Corina Machado has been very busy, holding meetings with Marco Rubio, representatives from both parties in the U.S. Congress, and leaders from the European Community. Her return to Venezuela is beginning to emerge. On the other hand, her team has commented little on the new laws that have been aired in the National Assembly.

 

The big question Venezuelans are asking is whether this is a process of guided transition to democracy and the re-institutionalization of the country or just a stage-managed scheme to buy time and stay in power. For now, cautious optimism prevails.

 

Oil Operations

Trading companies Vitol and Trafigura are handling exports of inventories accumulated since late December and January 2026, as well as exports previously carried out by PDVSA. For this operation, shadow fleet tankers loaded with Venezuelan crude are being unloaded in Curaçao, the Bahamas, and Saint Lucia, from where they are marketed by Vitol and Trafigura's chartered fleets. Marco Rubio clarified that once the situation normalizes, PDVSA will return to managing its exports under agreements with the U.S.

 

For the first time in many years, Citgo acquired Venezuelan crude through traders, and diluent began arriving at José from the U.S.

 

Baker Hughes, like other U.S. oil service companies, announced it was preparing to resume operations in Venezuela.

 

Production and Export Data

This week's crude production was 861 Mbpd, geographically distributed as follows:

 

West: 242 Mbpd (Chevron: 104 Mbpd)

East: 112 Mbpd

Orinoco Belt: 507 Mbpd (Chevron: 128 Mbpd)

TOTAL: 861 Mbpd (Chevron: 232 Mbpd)

 

Chevron mentions that it planned to increase its crude exports to the U.S. to nearly 300 Mbpd, equivalent to a formation production of 260 Mbpd (the rest is diluent).

 

In domestic refineries, 216 Mbpd of crude and intermediate products were processed, yielding 75 Mbpd of gasoline and 61 Mbpd of diesel.

 

It is difficult to estimate the actual export for January due to the use of ports and intermediate storage in the Caribbean. In any case, the crude sold is nearly 800 Mbpd.

 

Prices for the Venezuelan basket during the last week averaged $56/BBL, a significant increase reflecting international prices.

 

 

¹ International Analyst

² Nonresident Fellow Baker Institute