Iran and the U.S. Sideline Israel and Negotiate

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

In what could be described as “Realpolitik,” Iran and the U.S.—long-standing adversaries—decided to sit down and negotiate a way out of the armed conflict in the Middle East, setting aside principled rhetoric and prioritizing, at least for now, their economic and geopolitical interests.

Following the announcement of an initial peace agreement and ceasefire between the U.S. and Iran—which includes reopening the Strait of Hormuz and lifting the U.S. naval blockade in the Gulf of Oman to restore oil trade—markets declined. Israel’s persistent attacks against Hezbollah in Lebanon continue to challenge the stability of the truce and to influence negotiations to which it has not been invited. 

Meanwhile, in Europe, the conflict between Russia and Ukraine continues to escalate. A massive Ukrainian drone strike against a Moscow oil refinery brought the war directly to the heart of Russia. In Évian (France),Western leaders gathered at the G7 Summit to address global volatility and support for Ukraine. In the U.S., the opening of the 2026 FIFA World Cup in North America—a mega sporting event unfolding under tight security arrangements amid a sensitive international political backdrop—has been marked by strict immigration controls and on-field results used as geopolitical proxies.

Geopolitical Fundamentals

Pressured by the approaching midterm elections, the collapse of the Iranian economy, the threat of inflation, and the risk of a global recession, the U.S. and Iran agreed to a 60-day ceasefire, during which they will negotiate a lasting peace agreement. Their primary short-term goal is to reopen the Strait of Hormuz and halt the downward spiral undermining the global energy system.

The memorandum of understanding between the U.S. and Iran was signed by President Donald Trump at the Palace of Versailles—more specifically, in the celebrated Hall of Mirrors, the same historic hall where the Treaty of Versailles was signed in 1919 to end the First World War. On the other side of the world, the same document was signed by Iranian President Masoud Pezeshkian and the Prime Minister of Pakistan, who served as mediators between the two countries.

In this new chapter, and judging by the text of the agreement, Iran appears to have emerged in a stronger position: free from oil sanctions, with assets and funds unfrozen, its sovereignty recognized, the U.S. blockade lifted, and the prospect of a $300 billion reconstruction fund. However, none of this is yet set in stone, and there remains a long road ahead, particularly regarding nuclear weapons.

The question remains whether there will also be a fund—albeit a smaller one—to compensate for the damage caused by Iran and its allies in Saudi Arabia, Qatar, Bahrain, Kuwait, Oman, and Israel.

The initial reaction of capital markets was broadly positive. Although the opening of negotiations in Switzerland was threatened by President Trump’s verbal volleys, at press time, there was talk of a breakthrough.

Many analysts hold little hope that the negotiations will lead to lasting peace in the region. On the contrary, an Iran emboldened by its demonstrated ability to disrupt transit through the Strait of Hormuz, and now with greater economic resources, represents a latent threat to regional stability.

·       Greater capacity to suppress internal dissent.

·       More resources to fund its international terrorist network.

·       Greater ability to disrupt global energy flows.

Even so, reaching a negotiated agreement—setting aside the details and decisions made during the war—had become an international imperative. The goal is to restore dynamism to the global energy system through the free flow of oil and LNG across the Middle East, without chokepoints or strategic blockades.

Unsurprisingly, Israel appears dissatisfied with the way events have unfolded; despite having borne much of the risk of a war it prosecuted with precision, which it regards as existential. At the decisive moment, it was excluded from the negotiations and received nothing but reproach from President Trump and from Vice President Vance.

One of the most criticized aspects of the initial agreement is its pragmatic stance on human rights. Despite months of intense internal protests, violently suppressed by the Tehran regime—now formally led by the hardline faction under Mojtaba Khamenei—the Versailles text contains no condemnation of, or conditions related to, civil liberties or human rights. Activists warn that economic relief could provide the state apparatus with the resources needed to consolidate internal control and perpetuate repression. It is, in a sense, a repetition of the U.S. strategy in Venezuela, but without Washington’s guardrails.

Energy, Sanctions, and the Strait of Hormuz

The U.S.-Iran ceasefire opens a 60-day window to evacuate oil and LNG trapped in the Persian Gulf, while the thornier issues related to enriched uranium and Iran’s nuclear program are negotiated. However, despitethe initial announcements, the pace of vessel departures has been surprisingly slow. Against this backdrop, OFAC issued General License X on Monday, which authorizes a broad range of operations in Iran’s hydrocarbon industry.

With the situation between Israel and Lebanon hanging by a thread, Iran has attempted to reassert its authority over the Strait in the days following the memorandum. However, markets expect the long-awaited reopening sooner rather than later, judging by the collapse of oil futures.

Although the reopening of the Strait of Hormuz had not yet materialized and transit remained effectively restricted, the International Energy Agency (IEA) released a new report asserting that the global oil sector could return to surplus by the last quarter of 2026. According to the agency, a reduction in hostilities in the Middle East would allow lost supplies to return to the market.

The report projects average global oil demand of 103.3 MMbpd in 2026, representing a 1.1 MMbpd decline from 2025. It also forecasts that the main supply deficit is now behind us and that the world is heading toward a 5 MMbpd surplus by 2027. The IEA further estimates that global oil supply will grow by around 8 MMbpd to reach 110 MMbpd in 2027.

According to the agency, these surpluses could offer “a welcome relief to the market” and create an opportunity to replenish inventories or build new strategic reserves, as countries reassess their energy policies in light of the lessons of the crisis.

As has become customary, these projections differ substantially from those published by OPEC. In its June report, the cartel forecasts annual oil demand growth of 1.0 MMbpd in 2026 and 1.7 MMbpd in 2027. The divergence also extends to supply estimates: according to OPEC, production growth would not be sufficient to outpace demand.

The U.S., the world’s largest hydrocarbon producer, continues to have no material impact on the global balance. In line with the rest of the market, it is experiencing an unusually sharp decline in commercial crude inventories, coinciding with markedly low levels in the Strategic Petroleum Reserve. Changes in drilling activity, hydraulic fracturing crews, and production can best be described as stagnant on a plateau.

Russia, Ukraine, and the G7 Response

In Eastern Europe, the war between Russia and Ukraine retains the character of an intense war of attrition, marked by massive drone and missile strikes. Early in the week, Russia launched an offensive involving 70 missiles and more than 600 drones, killing at least 11 people and causing severe material damage, including a fire at Kyiv’s historic Dormition Cathedral. 

Toward the end of the week, Ukraine reported new waves of attacks and claimed to have neutralized 92 of the 99 drones launched by Russia in a single night. In response, Kyiv deployed fixed-wing drones against the Moscow region on several consecutive days, setting fire to its main refinery and exacerbating fuel supply problems.

Russia claimed to have intercepted up to 157 Ukrainian drones across 14 regions in a single day. On the eastern front, it announced the capture of Yorkovka, further tightening the noose around the Ukrainian strategic strongholds of Sloviansk and Kramatorsk.

The G7 Summit in Évian, attended by Donald Trump, focused on the war in Ukraine and reflected a notable shift in the group’s dynamics, with renewed international resolve against Putin. According to French President Emmanuel Macron, there was significant convergence with the U.S. leader, who stated that “the occupied territories must be returned to the Ukrainians” and declared that Vladimir Putin shows no genuine willingness for peace. Trump also called on Russia to reach a deal to stop the massive loss of life at the front.

Taking advantage of the U.S.-Iran agreement to stabilize the Strait of Hormuz and global oil markets, G7 leaders agreed to sharply tighten sanctions on Russian oil and gas, with particular focus on the so-called “shadow fleet.” They also pledged to accelerate the delivery of air defense systems, such as Patriot interceptors, and long-range capabilities to protect Ukrainian cities. In addition, G7 members expressed willingness to issue licenses enabling Ukraine to scale up its industrial weapons production.

International pressure, sanctions, and strikes against oil infrastructure have taken a toll on Russia’s energy industry. The most significant effects include:

·      Production below 9 million barrels per day (9.0 MMbpd).

·      Limited exports due to terminal disruptions.

·      Product shortages in the domestic market.

·      Difficulties in the supply of fuels and raw materials for the defense industry.

During the same period, the formal opening of the first negotiating cluster—called “Fundamentals”—took place for the accession of Ukraine and Moldova to the European Union. This step consolidates their institutional integration into the West, despite warnings from the Kremlin.

China and the Global South

Meanwhile, China is intensifying its strategy of international coalition-building to counter Western influence. To host the upcoming BRICS+ group summit, advisors and diplomats in Beijing are advancing a reconfiguration of their global trade strategies.

The overriding objective is to reinforce multilateralism, shield itself against potential U.S. sanctions, and consolidate its financial weight in the Global South.

Price Dynamics

During the week of June 13–20, 2026, oil and natural gas markets reacted primarily to the U.S.-Iran ceasefire, which facilitated the partial reopening of the Strait of Hormuz. The de-escalation eased fears of scarcity that had inflated markets in previous months.

Brent crude gradually declined, closing the week at around $80.57/bbl on Friday, June 19, with a cumulative loss of over 8.5%. WTI followed a similar trajectory, contracting by approximately 10.5%, to settle at $77.33/bbl.

Natural gas also traded in a stabilizing pattern with mild corrections at its main trading hubs. In the European market (TTF), the benchmark price hovered around €42.06/MWh as of June 19.

In the North American market (Henry Hub), gas traded in a more stable range at around $3.37/MMBtu, pressured by continued growth in domestic production outpacing seasonal energy demand.

 

Venezuela

A Serialized Drama

In yet another chapter of the tropical drama that is Venezuela, Washington surprised observers by announcing that Dinorah Figuera would return to Venezuela at the “invitation” of the U.S. State Department. Dr. Figuera, the last president of the National Assembly elected in 2015 and, until recently, the head of the parallel interim government, met with the current government's authorities to agree on the institutional rules governingthe third stage of the Trump/Rubio plan: the transition. 

In practice, the U.S. brought the 2015 opposition parliament—which asserts its original legitimacy and continuity—and the current Chavista legislature to the same table, with the goal of accelerating the democratic transition. Figuera and Jorge Rodríguez agreed to establish “a technical and political working group, with concrete milestones and timelines,” aimed at strengthening democracy, consolidating peace, and improving the welfare of Venezuelans, according to a National Assembly statement that offered few additional details. 

A Trump administration spokesperson indicated that the agenda would include priorities such as rebuilding democratic institutions, strengthening the National Electoral Council (CNE), restoring guarantees for political participation, and protecting the civil liberties necessary for open political debate. 

The exclusion of María Corina Machado and the Unitary Platform from the process, despite the Panama Manifesto, generated considerable comment and criticism on social media. Figuera explained that her role was strictly institutional: to agree on the ground rules for a free and broadly participatory political-electoral process. For Machado, the exclusion may prove advantageous, shielding her from potential entanglements. 

The transition has accelerated because the constitutional six-month deadline for the interim government is approaching, with presidential elections not yet formally called.

During the first two stages of the U.S. plan—stabilization and recovery—there were efforts on the part of U.S. oversight in the economic sphere; however, the results remain limited, particularly due to a lack of coordination among the interim government’s agencies, despite a sharp increase in the availability of foreign currency during the stabilization phase.

The Central Bank of Venezuela (BCV) has accelerated the depreciation of the official exchange rate, such that, if the trend continues, the official rate and the so-called intervention rate could converge next month. However, whether that is the bank’s intention remains unclear. The gap with the parallel market remains uncontrolled, partly due to liquidity management, fueling an inflation that keeps prices beyond the reach of most Venezuelans. Any potential macroeconomic improvements have yet to translate into genuine improvements in living standards. At the close of the week, the official rate stood at 612 Bs./$.

During the recovery phase, numerous meetings have been held with key industry players, investors, and funds of various sizes, with whom letters of intent and memoranda of understanding (MOUs) have been signed. To date, these agreements have laid bare the lack of an institutional framework, transparency, and clear rules governing the process.

The deadline set in the new Hydrocarbons Law (LOH) for adapting existing contracts to its requirements falls in early July. To date, no contract has been signed under the new negotiated fiscal terms, delaying any additional investment in the coming months.

Reports also indicate that Delcy Rodríguez held meetings with U.S. oil companies ExxonMobil and ConocoPhillips to explore their return to Venezuela, as well as with Indian conglomerate Reliance regarding the placement of Venezuelan crude at its refineries. However, none of these talks has translated into investment decisions, raising doubts about the ability to raise oil production to the levels required for an eventual restructuring of external debt.

In short, the U.S. State Department appears to be firmly setting the terms of its engagement: it is pressing for legal, fiscal, and human rights reforms through control over the flow of funds, energy, and regulatory agreements, the release of political prisoners, and now, the launch of an institutional transition.

In this magical realism that is Venezuela, there exists a government that is little more than a fiction, since the decisions that matter are made from the north. Yet the expected results leave much to be desired, owing to the continued grip of the traditional Chavista wing, internal disorganization, a lack of transparency, and the opacity of processes designed to preserve past privileges throughout the transition.

Petroleum Operations

Production remained essentially flat during the first half of June. Output averaged 931 Mbpd in the last week, distributed geographically as follows:

·                  West                252      

·                  East                 111

·                  Orinoco Belt    568      

                      TOTAL             931      

Production details for the most significant operators and the largest Joint Ventures (JVs) in the Orinoco Belt are as follows:

·      Chevron:           261 Mbpd

·      Repsol:               50 Mbpd

·      M & P:                29 Mbpd

Other joint ventures in the Orinoco Belt closed the month of May with the following average production figures:

·      Sinovensa:                   98 Mbpd

·      PetroRoraima:             32 Mbpd

·      PetroMonagas:            97 Mbpd

·      PetroCedeño:              85 Mbpd

National refineries processed 270 Mbpd of crude and intermediate products, yielding 80 Mbpd of gasoline and 78 Mbpd of diesel. 

No changes were reported in the activity of the three petrochemical complexes.

Monthly exports, based on the first half of the month, are on track to reach 750 Mbpd of crude and 50 Mbpd of residual fuel. 

The Venezuelan crude basket averaged $83.2/bbl, in line with the decline in international prices.

[1] International Analyst

[2] Nonresident Fellow Baker Institute

MISSILES AND DIPLOMACY: TWO SIDES OF THE SAME COIN

 El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

By the end of the week, the geopolitical situation in the Middle East stood between the prospect of a peace agreement and, following the severe bombing campaigns and missile exchanges that took place between June 8 and June 13, 2026, the risk of a full-scale war.

The extreme violence of recent days and the need of both sides to bring the conflict to an end appear to have accelerated diplomatic efforts. After a series of conflicting statements from both camps, these efforts culminated on Sunday in a ceasefire agreement. Although far from a definitive solution, the agreement eases tensions and establishes a sixty-day period during which a more durable arrangement may be negotiated.

Analysts from The New York Times and international agencies note that, while Washington is pushing to end the conflict in support of its domestic policy agenda, the Israeli government continues to view Iran as an existential threat and could act unilaterally if it concludes that Tehran’s concessions regarding its nuclear program are insufficient.

The international community is cautiously optimistic that the truce—expected to be formally signed in Geneva later this week—will hold. However, concerns remain that renewed hostilities could reignite large-scale bombing campaigns, including Israeli operations in Lebanon. Against this backdrop, markets have increasingly priced in the likelihood of a successful agreement. As more crude oil moves through the Strait of Hormuz under military protection, oil prices have fallen to their lowest level in two months.

GEOPOLITICAL DEVELOPMENTS

Following a Hezbollah rocket attack and retaliatory Israeli airstrikes in Beirut, Iran broke the fragile ceasefire by launching missiles and drones toward Israel, most of which were intercepted. Israel responded by striking several Iranian cities, including Tehran, as well as petrochemical facilities. Iran then targeted Israeli military positions and launched attacks against U.S. and allied interests in the Persian Gulf, including Kuwait, Bahrain, and Jordan.

The Islamic Revolutionary Guard Corps (IRGC) closed the Strait of Hormuz and shot down a U.S. helicopter in Omani airspace. In response, the United States carried out precision strikes against Iranian air-defense systems and naval assets, triggering a dangerous escalation and renewed concerns about a global energy crisis.

Hours after threatening to destroy refineries on Khark Island, President Trump announced on June 11 that additional bombing campaigns would be suspended due to significant progress in high-level negotiations. A fourteen-point peace proposal was drafted in Islamabad, seeking to bring an orderly end to what Washington referred to as the “12-Day War.”

A comprehensive 60-day ceasefire was eventually announced, including the Lebanese front, together with the lifting of the U.S. naval blockade and the reopening of the Strait of Hormuz. Negotiations concerning Iran’s nuclear program were deferred to a second phase. Discussions regarding sanctions relief were also reported. Oil prices reacted sharply, with Brent crude falling below USD 90 per barrel.

CRUDE OIL MARKET BALANCE

Last week, we examined why the balance between supply and demand was not as fragile as many assumed following the closure of Hormuz and the disruption of Gulf shipping routes.

According to Kpler, approximately 136 million barrels of non-Iranian crude transited the export routes through Hormuz and the Gulf of Oman between early April and June 10. While average volumes were around 1.9 million barrels per day, recent traffic levels have approached 3.0 million barrels per day.

Despite International Energy Agency estimates suggesting a loss of 14 million barrels per day of Gulf supply, our calculations indicate a more moderate reduction of roughly 6 million barrels per day. Iraq continues to export close to 3 million barrels per day, Kuwait has recovered to more than 1 million barrels per day, and alternative pipeline routes have limited the impact on Saudi Arabia and the UAE.

Additional factors include increased U.S. exports, the release of 380 million barrels from strategic reserves, and weaker Chinese demand. Conversely, declining Russian production continues to tighten the balance. The effective supply deficit, as reflected in inventory movements, is currently estimated at approximately 2 million barrels per day.

PRICE DYNAMICS

Oil prices rose early in the week amid clashes between Iran and Israel and surged again after U.S. strikes on Iranian facilities. However, sentiment reversed sharply following the announcement of a ceasefire brokered with the support of Pakistan and Qatar.

By the end of the week, Brent and WTI crude benchmarks had declined roughly 6% compared with the previous week’s close. At the time of writing, prices had fallen further to USD 82.96 per barrel for Brent and USD 80.30 per barrel for WTI.

Natural gas markets also weakened. In the United States, Henry Hub prices fell more than 3% to below USD 3.10/MMBtu, while Europe’s TTF benchmark declined nearly 6% to EUR 46.78/MWh.

VENEZUELA

THE LAW OF THE JUNGLE: “NIÑO GUERRERO” ELIMINATED

President Trump announced that, under his direct instructions, U.S. Southern Command carried out a lethal kinetic operation that eliminated Héctor Rusthenford Guerrero Flores, known as “Niño Guerrero,” leader of the Tren de Aragua criminal organization, reportedly in Bolívar State.

The operation underscored the continued erosion of the Venezuelan authorities' territorial control. The interim government subsequently confirmed Guerrero’s death, stating that the operation involved intelligence sharing and engagements with criminal groups operating in the area.

POLITICAL AND ECONOMIC SITUATION

Venezuela continues to face profound institutional challenges. The extension of the economic emergency decree, discussions regarding external debt restructuring, diplomatic tensions, persistent inflationary pressures, and social demands linked to inadequate public services remain key issues.

Following Nicolás Maduro's departure, the new governing structure is seeking both domestic legitimacy and international recognition while managing pressure from Washington and internal opposition groups organized around the Panama Manifesto.

The Central Bank of Venezuela reported a monthly inflation of 6.3% in May, the lowest figure in nineteen months. Nevertheless, independent analysts estimate annual inflation at over 600%, continuing to erode household purchasing power.

HYDROCARBON INVESTMENT AND EXTERNAL DEBT

Efforts to attract investment into Venezuela’s hydrocarbon sector continue to be hampered by weak institutional frameworks, uncertainty surrounding Production Participation Contracts, OFAC licensing requirements, and unresolved fiscal issues.

Without transparent and sustainable arrangements regarding royalties, income taxes, and the overall fiscal burden, attracting large-scale investment will remain difficult. As a result, production growth is likely to remain below potential, limiting the country’s capacity to generate revenue and renegotiate its external debt obligations.

The interim government is promoting a broad refinancing process involving more than USD 70 billion in defaulted bonds, additional liabilities, arbitration awards, and accumulated obligations owed to international creditors.

INTERNATIONAL AGREEMENTS

Shell signed an agreement with PDVSA to develop the Loran Field in the Deltana Platform. Gas produced from the project will supply Trinidad’s LNG facilities and petrochemical industry. This development complements the Dragon Field project north of Paria, which is also being developed with Shell.

Schlumberger’s president visited Venezuela during the week, and agreements were reportedly signed relating to the country’s geoscience data systems. Trafigura also held meetings in Caracas, likely focused on its role as a major exporter of Venezuelan crude.

OIL OPERATIONS

According to OPEC secondary sources, Venezuela produced 1.072 million barrels per day in May, up 36,000 barrels per day from the previous month. Our estimates remain lower due to methodological differences involving condensates, diluents, and field adjustment factors.

Production improved during the week as electricity shortages affecting oil fields were partially resolved.

Estimated production by region:

Western Region: 252 Mbpd

Eastern Region: 112 Mbpd

Orinoco Belt: 565 Mbpd

Total: 929 Mbpd

Refineries processed approximately 266 Mbpd of crude oil and intermediate products, yielding 79 Mbpd of gasoline and 78 Mbpd of diesel fuel.

The José Petrochemical Complex continues to operate despite natural gas constraints, producing methanol, ammonia, and urea. Exports remain broadly on schedule despite loading-pump issues at the José terminal.

The average price of the Venezuelan crude basket was USD 86.1 per barrel.

THE MARKETS DEFY REALITY

 El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

The global geopolitical situation continues to be defined by instability in the Middle East, a stalled yet active conflict in Ukraine, and a realignment of relations among the major powers — largely driven by the Trump administration — giving rise to a fragmented international order.

 

Energy markets remain disoriented in a landscape that offers few alternatives. The problem can be summarized as a persistent supply shortfall of 8 million barrels per day (8 MMbpd) of oil and 30 billion cubic feet per day (30,000 MMcfd) of natural gas, which — given robust demand — is draining global inventories to critical levels in some regions.

 

To many analysts' surprise, oil and natural gas prices, though volatile, do not appear to reflect the severity of the situation. A possible explanation emerges when considering the following factors:

 

•       Peace Negotiations. Despite fruitless back-and-forth between Iran and the United States, there is optimism that the deadlock in the Middle East will soon be broken. This diplomatic path is being pursued by President Trump, who seeks to defuse the conflict; however, fresh attacks against Kuwait and Oman are creating a roller-coaster of expectations.

 

•       China. Given OPEC+'s current impotence, the Asian giant has decided to act as a market stabilizer by cutting its imports by nearly 5 million barrels per day and meeting part of its domestic demand from its strategic reserves, which it had built up ahead of the Persian Gulf conflict by purchasing Russian and Iranian crude at discounted prices. Private refineries, commonly known as “teapots,” are also operating at reduced levels while the crisis persists.

 

•       Hormuz. Transit through the Strait of Hormuz and the U.S. blockade downstream have become somewhat more permeable; approximately 3 MMbpd have been exiting the Persian Gulf, even though it is technically considered blocked.

 

•       Finally — though of lesser weight — crude inventoried in Venezuela in December 2025 and January 2026 has been entering the market at a rate of 300 thousand barrels per day (300 Mbpd), boosting the country’s ordinary exports, as evidenced primarily by a surge in supply to India. Nevertheless, this represents a volume of roughly 30 MMBBL, with its market placement nearly spent.

 

Supply balances reveal the effectiveness of the U.S. blockade in the Gulf of Oman. Iran’s oil exports collapsed to six-year lows in May, averaging just 250 Mbpd, wiping out the advantage Iran had gained following the closure of the Strait of Hormuz.

 

The supply decline from the other major producer, Russia, has exacerbated the crisis: falling exports and limited refining capacity, both reportedly due to Ukrainian drone strikes on Russian oil infrastructure. Russian Deputy Prime Minister Alexander Novak acknowledged that the intensification of Ukrainian attacks is affecting Russia’s ability to sell and process crude — an unusually public admission.

 

In any case, as long as the crisis persists, China’s tactical management of its inventories will largely offset the entire supply shortfall. Once that balance is achieved, global inventories will remain relatively stable at 8,000 MMBBL, thereby stabilizing oil prices.

 

In summary, the energy crisis is acting as a supply shock, driving up inflation and dampening economic growth. However, the expected global impact will be lasting but moderate compared with past crises, thanks to the system's resilience and diversification. That said, a prolongation of the conflict will erode the positive price effect currently provided by inventory management.

 

Geopolitical Fundamentals

The Middle East and the Strait of Hormuz

The military stalemate in the U.S.-Iran conflict, combined with the chokehold on hydrocarbon supplies, has led both parties to explore diplomatic off-ramps. According to U.S. government sources, progress was being made toward a possible temporary peace agreement, though Iranian spokespeople have denied it. However, this week’s attacks against Kuwait and the Friday morning bombing in Oman dampened expectations of a U.S.-Iran de-escalation, following the already fragile ceasefire between Israel and Lebanon.

 

Although Oman’s main port has reportedly resumed operations, the combination of negotiations and military incidents — possibly contradictory due to the absence of a clear central command in Iran — has left the market in a state of paralysis that will only lift when tangible results emerge.

 

Complicating matters further, Iran launched a missile attack against Israel last Sunday, which Israel then countered with strikes on Iran. Israel accepted the United States’ request to halt its attacks on Iran, but will continue operations against southern Lebanon, according to sources. Iran has suspended its operations against Israel but has warned that it will resume them if attacks on southern Lebanon continue. The Houthis, an Iran-backed militant group that controls much of Yemen, declared a ban on Israeli ships in the Red Sea, threatening a critical shipping route toward the Strait of Hormuz.

 

China’s Strategy and Inventory Flows

To shield itself from the elevated prices prevailing in today’s market, China is drawing on its strategic crude oil inventory and curtailing runs at private refineries to limit the losses these generate. Together, these measures account for a 19% decline in crude imports in May.

 

According to data intelligence firm Kpler, China’s seaborne crude imports in May could fall to their lowest level in a decade, reaching 6.5 million barrels per day, down from 8.1 million in April and 9.3 million barrels per day before the conflict.

 

Iran, meanwhile, has also fallen victim to its own blockade strategy; its exports in May and June represent only 10% of pre-closure volumes. In general, transit through the strait has become less restricted, currently running at between 15% and 17% of normal traffic.

 

Global Inventories and Incremental Production

Global inventories are the primary gauge of the global oil balance. Unfortunately, their determination relies on estimates and numerical approximations by analysts and researchers, based on published production and demand figures. At the onset of the supply shock, inventories began to fall sharply: in the first two months, they declined by 750 million barrels, an 8% reduction.

 

As the world adapted to the new reality, however, the pace of inventory decline slowed, thanks to a combination of strategic reserve drawdowns, demand reduction, improved crude evacuation from the Persian Gulf, and incremental production from other regions. The estimated inventory draw in the first days of June is just 2.5 million barrels per day.

 

OPEC+ has had little relevance throughout; its proposals for symbolic quota increases have had no market impact, as demonstrated by the communiqué from its latest meeting, held this past Sunday.

 

U.S. operators, though showing signs of increased activity in recent weeks — both in active drilling rigs and hydraulic fracturing crews — have not shown a production uptick, according to the EIA. As a result, the only countries that have contributed incremental production are Brazil and Canada. The Trans Mountain Pipeline is operating at full capacity, allowing incremental cargoes to be shipped to the Far East.

 

Price Dynamics

Short Term: Summer 2026

Taking into account the events and developments described above, our short-term oil outlook covers a period during which elevated prices prevail, ranging from $95/bbl to $100/bbl, depending on the duration of the supply disruption. Meanwhile, the depletion of regional inventories will generate logistical and economic problems in Asia and Europe. This forecast is premised on a gradual reopening of the strait beginning in early July.

 

Medium Term: 18 Months

For the medium term, we anticipate a relatively swift recovery in production from Persian Gulf countries, accompanied by incremental output from Brazil, Guyana, Canada, and the United States. However, supply will only rebalance with demand toward the end of 2027, with global inventories recovering only modestly. Consequently, prices will decline only to $80–$90/bbl in 2027.

 

Oil Price Dynamics

During the week, Brent crude prices fluctuated between $92 and $99/bbl, reacting to developments related to the Strait of Hormuz and the effects of Ukrainian drones, which struck Russian refineries and terminals. At the close of the week — Friday, June 5, 2026 — the benchmark Brent and WTI crudes were trading at $93.09/bbl and $90.54/bbl, respectively, a moderate increase of just over 2% compared to the prior week’s close.

 

VENEZUELA

 

Political and Economic Context

The first week of June continued in a whirlwind: it was marked by announcements, visits from potential investors, plans, promotional activity, and new legislation — yet, curiously, by widespread dissatisfaction among the many actors involved. Delcy Rodríguez’s first international trip and key legal reforms aimed at opening the economy to international private capital also made headlines.

 

On the political front, there was movement, though little progress. The regime appears to be acting to comply with specific directives from Washington, but most of the time the results amount to little more than symbolic gestures. For example, on the five-month anniversary of Nicolás Maduro’s absence from power, a mass prisoner release was announced at El Helicoide — a dark detention and torture center where political prisoners were being held. However, according to the NGO Foro Penal, the prisoners were instead transferred en masse to other detention facilities around the country, creating additional hardship for families and legal advocates. An unplanned consequence of this debacle was the embarrassment of Secretary of State Marco Rubio, who had told Congress that the closure had already taken place.

 

Legal Framework and Reforms

As problems arise — and possibly at the behest of the U.S. government — the National Assembly (NA) is approving organic laws with little debate, as occurred with the Hydrocarbons Law and the Mining Law. This time, the electricity sector was addressed, given that its constraints represent the Achilles’ heel of any attempt at economic recovery, particularly in the oil sector.

 

As in previous cases, following more than 15 years of state monopoly, the NA unanimously approved the reform of the Organic Law on the Electrical System and Service on first reading. The bill provides for concessions of up to 25 years, allowing both domestic and international private-sector players to invest in the generation, distribution, and commercialization of energy. The new reform appears to follow the same formula as the earlier laws: the mandate is nominally fulfilled, but the underlying subject has failed. All of these laws, while representing a step in the right direction, lack the elements necessary to attract investors and, in some respects, reaffirm the regime's statist bent: discretionary decisions and a lack of transparency are the most glaring shortcomings. Even Chevron — typically the backbone of Venezuelan production growth and a supporter of the Chavista regime — announced through its CEO that no additional investments will be made unless conditions change.

 

Secretary of State Marco Rubio maintained before Congress that things were evolving favorably and that only five months had passed, calling for patience. Nevertheless, despite the undeniable fact that oil revenues received by the Venezuelan Central Bank (BCV) had more than tripled, economic stabilization has not been achieved, due to the disjointed management of the foreign exchange market, which continues to maintain a wide gap between the official rate, the intervention rate, and the parallel market, fueling inflation and prices beyond the reach of ordinary citizens. Indeed, the official exchange rate closed at 567 Bs./$ and the spread hovered around 30%.

 

Another example of this disconnect between what is required and what is being implemented is the draft regulations for the Organic Hydrocarbons Law, which are circulating and clearly require a thorough overhaul. Similarly, a draft model oil contract circulating on social media is being reviewed by the interim government and PDVSA to make the terms more attractive to private companies, following investor complaints about excessive state control and incompatibility with OFAC licenses. Specifically, the clause granting the executive the legal authority to unilaterally cancel contracts with oil companies on grounds of “harm to the public interest” has already been modified — a provision that enabled expropriations over the past 20 years and is remembered with deep unease by investors.

 

Transparency and Financing

It is important to note the conspicuous lack of transparency in the management of oil revenues in both Washington and Caracas. Except for a few details shared with Congress and in Executive Order 14373, the Trump administration has provided almost no information about the system it has established to sell Venezuelan oil, collect revenues, and allocate the funds. The administration has also not published the written agreements it has entered into with the Venezuelan government, traders, buyers, banks, and other entities involved in the process.

 

The regime formally launched the process of presenting its new macroeconomic framework and external sovereign debt restructuring plan to the international financial community, with Centerview advising on financial matters and Hogan Lovells on legal matters. The IMF appointed Álvaro Piris as head of the mission for Venezuela. Despite all these steps, no credible recovery plan for the oil industry and the broader economy has emerged that would inspire confidence in the IMF, the World Bank, or the IDB. The absence of an economic model capable of generating future funds to service the debt suggests the process is premature. Moreover, the prospect of carrying out a restructuring without IMF participation seems somewhat far-fetched and even irresponsible.

 

Politics and Transition

In general, these inconsistencies between the call to invest in the country and the conditions being offered — along with the slow pace of releasing political prisoners, appointing an independent National Electoral Council (CNE), and restructuring the judiciary — are fueling the perception among a large segment of the population that compliance with the conditions of U.S. support is leading to a consolidation of the interim authorities, rather than to an early political transition based on elections. This climate of uncertainty may explain the somewhat surprising visit by General Dan Cain, Chairman of the U.S. Joint Chiefs of Staff.

 

The opposition, backed by statements from exile figures such as Edmundo González Urrutia, continues to insist on the need for transparent presidential elections, while María Corina Machado keeps pressing for a definitive political solution and her own return to Venezuela.

 

Separately, it was announced that a major hydrocarbons sector event, “Venezuela Energy Week,” is being organized to showcase the country’s investment conditions and the requirements for reactivating its industry. One hopes the event takes place with a clearer sense of when the political changes necessary to give any of these announcements real meaning will actually begin.

 

Oil Operations

During the week, power outages and the lingering effects of the accident that occurred a few weeks ago at the Planta Lama facility on Lake Maracaibo curtailed potential production growth.

 

This week’s production stood at 915 Mbpd, distributed geographically as follows:

 

West:                                      249 Mbpd

East:                                       110 Mbpd

Orinoco Belt:                          556 Mbpd

TOTAL:                                  915 Mbpd

 

Mixed enterprises operating under OFAC licenses and the new contracts established under the recently reformed Hydrocarbons Law (LOH) are producing the following volumes:

 

Chevron:                              256 Mbpd

Repsol:                                  50 Mbpd

M & P:                                    29 Mbpd

 

Other mixed enterprises in the Orinoco Belt closed the month of May with the following average production figures:

 

Sinovensa:                          102 Mbpd

PetroRoraima:                      32 Mbpd

PetroMonagas:                     92 Mbpd

PetroCedeño:                       90 Mbpd

 

National refineries processed 260 Mbpd of crude oil and intermediate products, yielding 77 Mbpd of gasoline and 79 Mbpd of diesel.

 

The José Petrochemical Complex is operating normally, though with limited natural gas availability. Daily production stands at 6,100 metric tons of methanol, 2,400 metric tons of ammonia, and 3,100 metric tons of urea. At the El Tablazo complex, the Chlor-Alkali plant was brought back online following a major maintenance overhaul. The Morón complex remains inactive due to a lack of natural gas.

 

May Exports

The official closing figures for May exports are as follows: 770 Mbpd were exported from current production, with a drawdown of in-country inventories. An additional 270 Mbpd were exported from offshore and floating inventories, for a total of 1,040 Mbpd exported; 50 Mbpd were shipped from Puerto Miranda to the island of Saint Lucia for inventory purposes.

 

Of the total exported, 760 Mbpd corresponds to Merey 16 crude, 138 Mbpd to Boscan crude, and 113 Mbpd to Hamaca crude. The crude oil loaded at Puerto Miranda corresponds to Blends 14 and 17, sourced from PetroZamora.

 

520 Mbpd were exported to the United States, 410 Mbpd to India, and 110 Mbpd to Europe (Spain, Italy, and the Netherlands).

 

The Venezuelan basket price averaged $87.3/bbl.

 

[1]: International Analyst

[2]: Nonresident Fellow, Baker Institute