Trump and Xi: A High-Profile Summit With Meager Results

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

The long-awaited summit between U.S. President Donald Trump and Chinese President Xi Jinping in Beijing — the first since the American returned to office — concluded without offering tangible solutions or bridging the gap on the issues dividing the two superpowers. The permanent reopening of Middle Eastern sea lanes, tariffs, rare earths, and above all, the future of Taiwan yielded no significant announcements following the meeting.

China, predictably, reiterated its support for the full reopening of the Strait of Hormuz and for freedom of navigation through that strategic corridor. Beijing also categorically rejected the militarization of the passage and any attempt to impose tolls. That stance, however, does not appear to have been sufficient to alter Iran’s decision to keep the strait restricted.

Exceptions to the blockade have so far been limited, focused primarily on the export of Iranian and Iraqi crude to Asian markets and a handful of liquefied natural gas (LNG) cargoes from Qatar sailing in “dark mode” (transponders off) to avoid seizure or attack. Reports suggest that the stalled diplomatic process is pushing Trump to decide over the weekend on a military action against Iran.

Global petroleum product supply is further strained by persistent Ukrainian drone strikes against Russian refining centers, which are affecting processing capacity and inventories. Additionally, the U.S. Treasury General License for Russian oil cargoes expires on May 16, threatening to displace significant volumes of supply from the Asian market. This was almost certainly one of the topics addressed at the Trump–Xi summit.

In an unusual convergence, both the International Energy Agency (IEA) and OPEC are forecasting a serious supply deficit despite demand reductions for the remainder of the year, resulting in an inventory drawdown of nearly 10%, to 97 days of supply.

Geopolitical Fundamentals

Enormous expectations surrounded the summit between the two superpowers. Donald Trump’s visit to Beijing to meet with Xi Jinping ended on a positive personal and diplomatic note, but without major tangible economic agreements or critical geopolitical breakthroughs. Although both leaders staged a display of harmony in the gardens of Zhongnanhai, financial markets reacted negatively to the absence of concrete resolutions. On Friday the 15th, the Dow Jones index fell more than 500 points.

Efforts centered on finding a political formula that would allow for stability and prevent open conflict. Xi Jinping summed up China’s position with the phrase: “We should be partners, not rivals.” Analysts took note of Xi’s expression of hope that both nations could avoid falling into the “Thucydides Trap.” It is not the first time the Chinese leader has invoked the tensions that led to war between Sparta and Athens in ancient Greece.

Trump, for his part, appeared less combative than usual, and his subsequent statements raised some alarm in Taipei regarding the firmness of America’s commitment to Taiwan’s independence. Trump also announced that China pledged to purchase 200 Boeing aircraft, renew import licenses for U.S. beef, and increase agricultural purchases. Xi Jinping accepted Trump’s invitation to visit the White House on September 24.

No progress was made on the sale of artificial-intelligence chips or on agreements on key rare-earth supply chains. We therefore conclude that the meeting served to ease bilateral tensions in the short term while leaving the underlying issues of the trade and geopolitical war largely intact.

The Strait of Hormuz

Although maritime shipping analysis firms reported a slight uptick in Hormuz transits — to approximately 10 vessels per day — the strait remains technically closed to the bulk of commercial traffic.

During the final days of the week, however, several large tankers successfully navigated the Strait of Hormuz using designated routes, aided by a temporarily brokered ceasefire. Among the most significant vessels were:

•       The Yuan Hua Hu, a Chinese VLCC (very large crude carrier) operated by COSCO Shipping, is carrying 2 MMBBLs of Iraqi crude bound for Asia.

•       The Eneos Endeavor is a Japanese supertanker that transports crude oil from various Gulf countries to Japanese refineries.

•       The Agios Fanourios, a Malta-flagged tanker, successfully delivered its cargo to Vietnam.

High-level peace negotiations between the U.S. and Iran, held in Pakistan, stalled once again. The U.S. extended its ultimatum threatening Iran’s core infrastructure, while Tehran hardened its stance through a maritime “blockade diplomacy” strategy. Trump’s declaration that “his patience is running out” and Iran’s response — that it was prepared to resume combat — closed the week at maximum friction.

Global Oil Market: IEA Analysis

A detailed analysis based on the latest IEA Oil Market Report, published on May 13, reveals the severity of the current supply crisis. According to the IEA, the global market will experience a severe supply shortfall lasting at least until October 2026. The report also notes that the reduction in crude supply drove a global inventory drawdown of 6 million barrels per day (6 MMbpd) in April.

In the United States, commercial crude inventories recorded a weekly decline of 4.3 million barrels, twice the market’s expectation. As a consequence of crude and product shortages in some regions and elevated prices, the IEA projects that global oil demand will contract in 2026 to 104 MMbpd, 1.3 MMbpd below the pre-war forecast. The steepest decline is observed in the second quarter of 2026, with a drop of 2.45 MMbpd, of which OECD countries account for 930 Mbpd and non-OECD countries for 1.5 MMbpd. The petrochemical and aviation sectors are currently the most affected, but higher prices, a weaker economic environment, and demand-saving measures will have an increasingly significant impact on fuel consumption.

OPEC Production and the Middle East

OPEC crude oil production has plummeted by more than 30%, equivalent to a massive decline of 9.7 million barrels per day (bpd). This historic collapse is a direct consequence of the effective closure of the Strait of Hormuz and the UAE’s withdrawal from the cartel, effective May 1. Saudi Arabia officially reported to the organization that its pumping levels have fallen to lows not seen since 1990.

The maritime blockade has forced the region’s major producers to implement large-scale shutdowns due to a lack of storage capacity and blocked transit routes. Production data highlights severe losses:

•       Kuwait: fell from 2.58 MMbpd in February to just 600 Mbpd in early May.

•       Iraq: production dropped from 4.18 MMbpd to 1.38 MMbpd.

•       Saudi Arabia: reduced by 3.3 MMbpd.

•       Iran: also affected by the U.S. blockade in the Gulf of Oman, with a reduction of approximately 15% in its production.

The UAE announced that it has accelerated construction of the “West–East” pipeline project to connect its crude oil fields to the port of Fujairah on the Gulf of Oman, in line with its recent withdrawal from OPEC. The pipeline, expected to begin operating in 2027, will allow the country to double its export capacity and bypass the Strait of Hormuz.

Russia–Ukraine Conflict

Following the expiration of the three-day truce in the Russia–Ukraine conflict, Russia resumed attacks on civilian infrastructure in Kyiv. However, Putin formally stated that the war in Ukraine “is approaching its end.” His remarks came on Saturday, May 9, 2026, at a press conference following the traditional Victory Day parade in Moscow. International analysts and intelligence reports suggest that Putin’s words reflect military and economic exhaustion, domestic popular discontent, and international pressure, including economic sanctions.

Meanwhile, the Ukrainian military continues its strategy of targeting Russian energy infrastructure. This week confirmed a massive drone attack on the Ryazan oil refinery, one of the largest crude processing facilities in the Russian Federation. The refinery suffered secondary explosions and a major fire. With a capacity of 360 Mbpd and located near Moscow, its damage means that approximately 17% of Russia’s refining capacity is now affected by the strikes.

United States: Production and Exports

The United States posted a slight increase in production, according to EIA statistics, while active rigs rose by 3 units. The increase in shale oil basins was 5 units, partly offset by a reduction in activity in natural gas basins. Crude exports also rose, exceeding 6.4 million barrels per day in May, perhaps the beginning of an effort to capitalize on the high-price environment.

Oil Prices

Global energy prices came under significant upward pressure, with oil posting a substantial rally of 8%-10%, while natural gas advanced at a moderate but steady pace, flirting with $3 per MMBtu in the U.S. market and reaching five-week highs in Europe.

Reduced LNG volumes on the market, rising oil and gas prices, weather forecasts predicting rising temperatures, and the substitution of oil with gas in some regions have driven the rise in natural gas prices.

At market close on Friday, May 15, 2026:

Crude	Price (USD/BBL)
Brent	$109.26
WTI	$105.42

 

Venezuela

Much Announcement, Little Confidence

External Debt Restructuring

Perhaps the most notable economic and political development of the past week is the announcement of the external debt restructuring process. Under the framework of General License 58, Venezuela’s interim government officially designated U.S. firm Centerview Partners as its financial advisor. In the normal course of events for a country, this measure would mark the beginning of a formal, comprehensive, and unified process to address total financial liabilities estimated at between $160 and $200 billion.

According to the authorities, the plan jointly encompasses the Republic’s financial obligations, PDVSA's bonds, and arbitration awards. The interim government indicated that it will present the international financial community with a macroeconomic framework and a debt sustainability analysis in June 2026. However, economists with expertise in the area believe the announcement is premature and lacks credibility, and fear it could lead to a process as complex as Greece’s, which began in 2010 and only concluded in 2018 after several confrontations with the financial community.

Oil Opening and the Hydrocarbons Law

Related to the oil opening intended to underpin the second phase of the Trump–Rubio plan, “the recovery,” a draft regulation began circulating on social media — one that might be expected to complement and clarify interpretive ambiguities arising from the recently approved Hydrocarbons Law (LOH). At first glance, the regulation, far from achieving that goal, raises additional questions and further expands the discretionary authority already identified in the LOH. The text will require thorough revision to achieve the objective of attracting investors beyond the fragile initial rush.

A draft contract for those interested in investing in Venezuela’s oil industry also began to circulate. We have not yet had access to this document, but representatives of oil companies indicated that, based on the original text, negotiations could prove more complex than previously projected.

If any proof were needed that the LOH was approved without adequate debate and the necessary political consensus, a group of citizens representing the hard-line wing of the PSUV and its associates filed a petition before the TSJ (Supreme Court) seeking the annulment of the LOH on grounds of unconstitutionality. The ink on Extraordinary Official Gazette No. 6,978 had barely dried when the atavistic statist myths resurfaced: a renewed source of concern for potential participants in this opening, and further evidence that without elections conferring a mandate, any reform will remain vulnerable.

Political Transition: Diverging Visions

As the country attempts to complement or correct the mechanisms intended to attract foreign and domestic private investment to increase oil and gas production — as part of the U.S. recovery strategy — the desired political transition (the third stage of the Rubio plan) divides the visions of the Trump administration and the Venezuelan opposition.

Chris Wright, Secretary of Energy and de facto bearer of the official U.S. position, indicated that it is important to have the economy recover before holding general elections, in order to avoid the early wear on a newly and democratically elected government. In contrast, opposition representatives led by María Corina Machado and other leaders argue that economic recovery can only be achieved after the political transition, since the large investments required will only arrive in a stable Venezuela with institutions, separation of powers, and guarantees of respect for laws, contracts, and agreements.

Internal Tensions

Serious divisions among factions are evident within both the interim government and the ruling party. On one front, internal accusations of treason against Maduro and his wife are being debated; the recent extradition to the United States of Colombian-Venezuelan Alex Saab adds fuel to those rumors. On another, what is perceived as an effort to eliminate retroactivity and other provisions of the Labor Law has met with strong opposition from those who view it as Chávez’s final legacy and insist it must not be changed.

Adding to this internal discontent are rising street temperatures, a population increasingly affected by inflation and inadequate income adjustments, the continued failure to release political prisoners, mounting evidence of human rights violations against prisoners and the disappeared, and the ongoing use of repression to control protests.

Economic Situation

On the economic front, May differs little from April: high public spending to generate liquidity in the foreign exchange market, offset by the sustained imposition of high bank reserve requirements. The slide of the official exchange rate has slowed, and as a result the exchange rate gap has returned above 30%. At the close of the week, the official rate stood at Bs. 515/$.

Oil Operations

Accident at the Lamargas Plant (Lama)

On Friday, May 15, 2026, a powerful explosion followed by a fire occurred at the Lamargas (Lama) gas plant, a facility located in Lake Maracaibo in Zulia state. The plant, situated in Block 5, is operated by China Concord Resources Corp. under a CPP signed within the framework of the Anti-Blockade Law. At least six workers were reported injured with burns of varying severity. The block was producing only 8,000 barrels per day; the impact on production could be material, as the plant supplied the gas lift gas for the area. The affected volume will be known next week.

This operator had previously experienced another accident when the jacking base of the self-elevating drilling rig they brought into the country caused the rupture of a sub-lake flowline, resulting in a spill and the shutdown of production.

Weekly Production

Electrical problems have continued to affect oil operations, offsetting gains achieved through drilling efforts and the reduction of deferred production. This week’s output stood at 912 Mbpd:

Region	Production (Mbpd)
Western Venezuela	253
Eastern Venezuela	108
Orinoco Oil Belt	551
TOTAL	912

 

Companies under OFAC licenses and new contracts (LOH)

Company	Production (Mbpd)
Chevron	252
Repsol	50
M & P	33

 

Mixed companies with Chinese, Russian, and independent partners (Orinoco Belt)

Company	Production (Mbpd)
PetroSinovensa	90
PetroMonagas	90
PetroCedeño	66
PetroRoraima	35

 

Refineries and Petrochemicals

National refineries processed 252 Mbpd of crude oil and intermediate products, yielding 76 Mbpd of gasoline and 77 Mbpd of diesel.

The Petrochemical Complex at José is operating normally, albeit with limitations in natural gas availability. Daily output stands at 5,900 metric tons of methanol, 2,600 metric tons of ammonia, and 3,500 metric tons of urea. The Morón Complex remains shut down, awaiting gas supply.

Exports and Basket Price

Crude shipments during the first half of May are consistent with export levels of 750 Mbpd.

The Venezuelan crude basket averaged $85.9/BBL.

 

¹ International Analyst

² Nonresident Fellow, Baker Institute

 

CHAIN CRISIS: FROM HORMUZ TO GLOBAL MARKETS

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

As diplomatic exchanges to restore free navigation through the Strait of Hormuz continue, the fragile ceasefire holds despite ongoing skirmishes between Iran and the United States. In response, energy markets are reacting with elevated and volatile prices amid contradictory — and at times exaggerated — messaging from Tehran and Washington. Crude oil prices posted a significant rebound following several dangerous naval confrontations in the Gulf of Oman, reversing the recent downward trend.

The effects of the current hydrocarbon supply crisis are intensifying, affecting everything from the fiscal positions of energy-import-dependent countries to physical shortages of key inputs for economic activity across Asia and Europe. OPEC is also in crisis, with the departure of one of its most significant members — the United Arab Emirates (UAE) — and production constraints stemming from the closure of the strait.

The cartel’s output has fallen sharply and is estimated to drop below 20 MMBPD in May. Even so, at its most recent virtual meeting, OPEC+ announced a production increase of 188,000 barrels per day starting in June. This gesture is more symbolic than effective while transport restrictions persist and a return to normalcy remains slow. Saudi Arabia alone would need to raise output from under 8 MMBPD to more than 10 MMBPD.

The situation is beginning to show up in inventories. Before the war began, global petroleum stocks stood at 106 days of supply; that figure has since fallen to 99 days and is projected to shrink further to 95 days. These are, of course, global averages, and the impact of reduced supply is being felt very differently across regions.

This elevated hydrocarbon price environment is weighing on the global economy by fueling inflation. When inflation persists, central banks face a dilemma: raising interest rates risks contracting the economy without addressing the underlying cause, while cutting them risks stoking further inflation. Ultimately, economies will likely contract, and demand destruction will begin to set in.

The situation at the Federal Reserve (Fed) is further complicated by Jerome Powell’s term as Chair expiring on May 15. Kevin Warsh, Trump’s nominee for the position, received approval from the Senate Banking Committee on April 29, and his full Senate confirmation vote is expected next week — paving the way for him to assume the chairmanship before the end of the month.

On the other active front, Russia and Ukraine have agreed to a three-day ceasefire running from Saturday, May 9, through Monday, May 11, 2026, which includes the release of 1,000 prisoners of war by each side. The truce, brokered by President Trump, coincides with Victory Day celebrations in Russia. Russian presidential adviser Yuri Ushakov confirmed acceptance of the diplomatic proposal, while President Zelensky expressed gratitude for U.S. involvement.

Trump is looking to arrive at his upcoming meeting with Chinese President Xi Jinping in China with as few open fronts as possible, particularly regarding the impact of oil supply on China. Yet, given the way the winds are blowing, oil supply to China is bound to be a major item on the agenda.

Geopolitical Foundations

The United States has put forward a proposal to end the conflict, pressing Iran to choose between diplomacy and confrontation. Washington is weighing and negotiating the details of a peace plan that reportedly addresses both Iran’s nuclear program and the permanent reopening of the Strait of Hormuz, as well as the U.S. naval blockade in the Gulf of Oman. Meanwhile, in the daily back-and-forth, the Pentagon reported that three U.S. Navy destroyers were attacked by Iranian drones, missiles, and fast boats while escorting merchant vessels under “Operation Freedom.” The U.S. response was swift, carrying out intensive strikes against Iranian military installations. Tehran, in turn, accused Washington of attacking an Iranian tanker and hitting military facilities on Qeshm Island. It is, without question, a ceasefire hanging by a thread.

In any case, last Sunday, President Trump flatly rejected Iran’s response to his proposal, calling it “totally unacceptable.”

China’s Foreign Ministry described the insecurity in the strait as “unacceptable,” after a tanker with a Chinese crew was caught up in the conflict. The Revolutionary Guard’s actions appear to lack coordination; in a remarkable turn of events, Iran seized the Ocean Koi in the Gulf of Oman — a sanctioned tanker operating on Iran’s behalf and carrying Iranian crude.

As all of this unfolds on the diplomatic and military fronts, the strait remains blocked, and the U.S. naval blockade in the Gulf of Oman has effectively paralyzed Iran’s ports, including the strategic terminal at Jask, severely hampering Iran’s oil exports. In a chaotic and costly workaround, hundreds of Iranian oil tanker trucks are making their way overland to Pakistan as a pressure valve to prevent production fields from being shut in.

Other oil executives have also warned of crude shortages, which the International Energy Agency (IEA) has described as the largest supply disruption in history. A return to normal will not come until several months after maritime traffic through the Persian Gulf normalizes; for liquefied natural gas (LNG), the recovery will be considerably slower.

OPEC+ Production

OPEC oil production fell to 20.55 MMBPD in April 2026, its lowest level since 1990. This decline, as revealed by a Bloomberg survey, reflects an additional 420,000 barrels per day from the prior month. Significant output reductions were recorded in Kuwait, Iran, Iraq, and Saudi Arabia. Beginning in May, UAE production will no longer be included in OPEC or OPEC+ reporting.

Seven OPEC+ countries will raise their production targets by 188,000 BPD in June, marking the third consecutive monthly increase, according to an OPEC+ statement following a virtual meeting. The increase mirrors the one agreed for May, except for the UAE’s quota, as that country left the group on May 1. The move is intended to signal the group’s willingness to boost supply once the war ends. It indicates that OPEC+ is pressing ahead with a “business as usual” approach despite the UAE’s departure.

Saudi Arabia’s quota, as OPEC+’s largest producer, will rise to 10.291 MMBPD in June under the agreement — well above actual production levels. The kingdom reported current output to OPEC of 7.76 MMbpd. Even once maritime traffic through the Strait of Hormuz resumes, it will take several months for flows to normalize, according to Gulf petroleum executives and international operators.

Confirming our estimates of the crude supplies that have failed to reach the market, Shell CEO Wael Sawan warned: “We have gotten ourselves into a mess with a deficit of almost a billion barrels of crude right now, whether blocked barrels or unproduced barrels, and that mess is getting worse every day,” he said on an earnings call. “The recovery will be long,” Sawan noted that the situation has led to approximately a 5% drop in demand from the aviation sector.

Europe and the Ukraine Conflict

On other fronts, the Kyiv-Moscow truce raised expectations from Trump, who hoped it would be the “beginning of the end” of the war. Long-term peace negotiations remain stalled over territorial disputes in the Donetsk region. Additionally, outlets such as Euronews noted that in practice the agreement mainly ensured that Ukraine would refrain from striking Moscow during the military parade in Red Square commemorating the Soviet victory over Nazi Germany.

These protracted wars in Eastern Europe and the Middle East have tested the loyalties of the various actors involved. It is clear that Europe fears Trump’s unpredictability and his willingness to act decisively; NATO and European authorities are therefore attempting to regroup and build an independent power base. Their precarious economic situation, internal political divisions, and lack of military readiness can only succeed if Russia’s economic and military decline continues.

The military and commercial cooperation between the UAE and Israel — demonstrated by the Emiratis’ defense against Iranian attacks — sends a clear signal that the Abraham Accords are working and represent a trend that could contribute to regional stability.

Production in Other Regions

Incremental oil supplies from other producing regions have been modest or nonexistent. Brazil alone has reported a significant increase in hydrocarbon output so far this year, with production rising by approximately 400,000 barrels per day (MBpd) to 4.2 MMbpd — a record for the South American country. Norway, for its part, has brought a couple of natural gas fields back online, helping to offset the deterioration in Europe’s gas balance caused by the shortage of Qatari gas. The United States and Canada have kept production levels steady, along with their capacity-building activities through drilling and hydraulic fracturing.

At present, most oil producers are unwilling to invest their elevated revenues in new drilling activity. As of late April, fewer rigs were drilling wells in the United States than when the war began, according to energy services firm Baker Hughes. And while U.S. oil production has grown significantly in recent years, domestic output could fall in 2026, according to the Department of Energy (DOE).

On the European geopolitical front, Hungary’s new Prime Minister, Peter Magyar, was sworn in, and closer cooperation within the European Union (EU) is expected under his leadership compared to his predecessor. In Romania, the collapse of the government following the rejection of a coalition between the far right and social democrats has opened a new front of instability on NATO’s and the EU’s eastern flank. Countries such as the Baltic Republics and Poland are approaching an unprecedented level of defense spending — close to 5% of GDP in 2026 — a commitment demanded by NATO that few EU members are meeting.

Price Dynamics

The conflict between the United States and Iran has kept global oil markets in a state of constant instability. Brent crude reached a high of $126.41 per barrel on April 30, and while prices have since moderated to around $104 per barrel today, the underlying risk of missile and drone attacks has not gone away.

Meanwhile, the U.S. Commodity Futures Trading Commission (CFTC) announced it will investigate posts made by President Trump on his Truth Social platform.

According to reports, the CFTC has opened an investigation into unusual activity in the oil market ahead of Trump’s recent social media posts, raising concerns about possible leaks of market-sensitive information or coordinated trading. An analysis by Reuters found that total bets — including those on Brent, WTI, European diesel, and U.S. gasoline futures — amounted to $7 billion. According to the analysis, these large-scale positions were executed in significant blocks over four specific days, often 15 to 20 minutes before announcements that triggered double-digit drops in oil prices.

The investigation is still in its early stages, and no individual or company has been officially named.

As of the market close on Friday, May 8, 2026, benchmark Brent and WTI crudes were trading at $101.29/BBL and $95.42/BBL, respectively, representing a decline of more than 6.4% compared to the prior week’s close.

VENEZUELA

You Can’t Teach an Old Parrot New Tricks

The geopolitical landscape and economic situation in the country remain uncertain. Attempts are being made to combine a forced opening to global markets with severe economic adjustments to curb domestic inflation. Opinions on the progress of the U.S. strategy in Venezuela are divided. While the Trump administration appears satisfied with what has been achieved so far, the interim government seems inclined to carry out its “tutelage” mandates in a manner that reflects Venezuela’s well-known playbook of “changing everything so that nothing really changes” — buying time in the process, whether to hold onto power or to reach elections from a position of advantage.

Economic Situation

On the economic front, the unprecedented surge in oil revenues has exposed a disconnect in the decisions made by Venezuela’s Central Bank (BCV) regarding the banking and financial system. Despite the greater flow of foreign currency, controlling the exchange market has become difficult in an environment of very high public spending and excessive reserve requirements used as liquidity management tools. The result is rising prices throughout the economy — including in dollar terms — and inflation that is eroding the modest wage adjustment approved to begin in May 2026. The pace of adjustment in the official exchange rate slowed, keeping the gap with the parallel rate at around 30%. At week’s close, the official rate stood at 500 Bs./$. In short, a familiar story.

The interim government has also formalized its return to the International Monetary Fund (IMF) and the World Bank, restoring Venezuela’s formal membership and access to financing after years of suspension. Engineer Calixto Ortega Sánchez was appointed as Venezuela’s governor to the IMF.

U.S. Secretary of Energy Chris Wright stated on May 8 that free elections in Venezuela depend on a stabilized economy, outlining a two-phase roadmap in which institutional reconstruction is the current priority. At the same time, drawing on assessments from American experts, he concluded that “Venezuela does not have a functioning banking system.” In his view, the absence of a functional financial structure is the primary obstacle to recovery. It remains unclear whether this reflects the White House’s position or simply a personal opinion expressed by one official.

Venezuelan sovereign bonds have also seen a significant rally following OFAC’s authorization for Caracas to retain advisors to negotiate the restructuring of its external debt, alongside a renewal of Citgo’s protection from PDVSA 2020 bondholders through June 19, 2026.

Social Situation and Human Rights

Despite U.S. tutelary efforts to shore up and stabilize the economy — which include a near-tripling of hard currency revenues and an aggressive push to attract investment in hydrocarbons and mining to revive economic activity — four months after Maduro’s removal, those gains have not filtered down to the population. Venezuelans continue to face ever-higher prices and wages that offer no real improvement. Meanwhile, the modest economic recovery has put the country’s already-deteriorated national power grid under new strain, intensifying outages and blackouts.

Furthermore, mounting evidence that the repressive apparatus and human rights violations continue has deflated the country’s hopes, leading many to conclude that the interim government is more of the same. Protests driven by economic grievances have intensified. Human rights have returned to the forefront following reports of the concealment and delayed disclosure of the death of Mr. Víctor Quero while in state custody and without due process; there are reports that others who have been forcibly disappeared may have suffered the same fate.

Oil Operations

The week has been marked by power outages that have affected production, primarily in the western part of the country. This week’s output stood at 906,000 barrels per day (906 MBpd), distributed geographically as follows:

West:               251 Mbpd

East:                108 Mbpd

Orinoco Belt:  547 Mbpd

TOTAL:            906 Mbpd

The joint ventures operating under OFAC licenses and the new contracts established under the recently amended Hydrocarbons Organic Law (LOH) are producing the following volumes:

Chevron:          249 Mbpd

Repsol:              47 Mbpd

M & P:               31 Mbpd

The Orinoco Belt joint ventures with Chinese and Russian partners produced:

PetroSinovensa:  91 Mbpd

PetroMonagas:    87 Mbpd

National refineries processed 242 MBpd of crude and intermediate products, yielding 72 MBpd of gasoline and 77 MBpd of diesel.

The Petrochemical Complex at José is operating normally, though output was marginally reduced due to electrical issues and limited natural gas availability. Daily production stands at 5,800 metric tons (MT) of methanol, 2,400 MT of ammonia, and 3,300 MT of urea. The Morón Complex remains idle, awaiting a natural gas supply.

April export figures require a revision, as a cargo bound for India departed in time to be counted within the month. Accordingly, crude shipped to India totaled 350 MBpd, bringing the month's total exports to 840 MBpd.

The Venezuelan crude basket averaged $86.3 per BBL.

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

OPEC and OPEC+: THE LATEST CASUALTIES OF THE MIDDLE EAST WAR

 El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

Despite the back-and-forth between the United States and Iran — advances and retreats toward a negotiated resolution — the Strait of Hormuz remains blocked. Iran is attempting to force a settlement by strangling the global economy, while the U.S. seeks to cut off the oil flows that sustain Iran's economy.

Announcements of openness to negotiations, followed almost immediately by withdrawals, have become a near-daily occurrence, sowing confusion in the market and driving price volatility. Aviation and automotive fuel supplies are beginning to run short, despite efforts to draw down inventories to cushion the blow. The energy crisis has also been worsened by successful Ukrainian attacks on Russian refineries and petroleum infrastructure. Meanwhile, Israel is mounting forceful operations in response to the drones and missiles that Hezbollah continues to fire from Lebanon into Israeli territory, in violation of the ceasefire.

As if that were not enough, the complexity of the oil market has deepened further following the announcement by the United Arab Emirates (UAE) that it is withdrawing from both OPEC and OPEC+, ending a membership in the cartel that had lasted more than fifty years. This decision represents a significant blow to OPEC+'s capacity for collective action and reflects a widening rift between the UAE's objectives and Saudi Arabia's leadership. The proverbial last straw — or at least the stated reason for the decision — is the UAE's view that the other Arab members of the cartel were not sufficiently proactive in defending the Emirates against Iran's attacks on its oil installations, amid the ongoing Gulf War.

Another potentially dangerous situation is unfolding in the Indian Ocean and the Gulf of Oman. China is quietly deploying a substantial naval force — destroyers, intelligence-gathering vessels, and submarines — to protect its trade routes. This posture could place it on a collision course with the United States, as well as with the blockade of vessels linked to Iranian exports.

For its part, the Kremlin is advising and supporting the Iranian regime, a development that could jeopardize its alliances in the war against Ukraine. Putin assured Iran's foreign minister that Russia would do its utmost to fulfill Iran's wishes within the context of the conflict. The White House says it has evidence that this cooperation extends beyond published statements and is not treating the situation lightly.

It has been, in short, a week packed with news that has rattled and then calmed the market on multiple occasions, driving oil prices to their highest levels since the war began — before cooling again following Iran's negotiating proposal, with prices settling below $110/BBL by the week's close.

In the United States, expectations are building around the potential revocation of Trump's war powers through legislative action.

Geopolitical Fundamentals

The U.S.–Israel–Iran Conflict

The war waged by the United States and Israel against Iran — which began on February 28 — undertaken primarily to eliminate the risks posed by a nuclear-armed Iran, continues on an unpredictable course. Following a truce agreed upon by the parties, diplomatic efforts have intensified to prevent further escalation, which has already caused severe disruptions to global energy supplies, and in which the presence and potential intervention of China and Russia represent a grave danger.

President Trump notified Congress of the cessation of direct hostilities with Iran just as the 60-day limit under the War Powers Resolution was reached. The truce has, in principle, held without direct exchanges of fire between the U.S. and Iran since April 7; it was extended by Trump on April 21 while awaiting an Iranian peace proposal. The proposal arrived, but appears not to satisfy the White House.

The President of the United States may only deploy the Armed Forces for 60 days without Congressional authorization. Optimists view the current quiet in the Persian Gulf as the end of hostilities, while skeptics counter that Trump is merely resetting the 60-day clock — circumventing the legal constraint — in order to strike again, likely in the near term.

Notwithstanding the U.S. announcement, Israeli Defense Minister Israel Katz warned that Israel might strike Iran again if its security objectives are not guaranteed. Indeed, the Israel Defense Forces eliminated more than 40 Hezbollah positions in southern Lebanon in a single day, destroying logistics hubs, tunnels, and command posts.

The Strait of Hormuz and the Global Energy Balance

The linchpin of the conflict remains Iranian control over maritime traffic through the Strait of Hormuz, to which the U.S. has responded by blockading vessels attempting to enter or leave Iranian ports in the Persian Gulf. As long as supply remains choked off by the impossibility of transiting the Strait of Hormuz and the Gulf of Oman, the global energy balance will continue to suffer severe disruptions. In the Western Hemisphere, this effect has so far been limited to elevated crude and fuel prices; in the rest of the world, however, shortages are worsening, with spot market prices exceeding those projected in futures markets. Compounding the situation is the impact on the LNG, fertilizer, and other input markets that are crucial to the global economy.

To date, the market has been deprived of roughly 540 million barrels of crude and refined products and approximately 455 BCF (455 billion cubic feet) of natural gas. In the latter category, the shortfall caused by the closure of the Strait has been partially offset by increased LNG supplies from the United States. Kuwait just announced that it exported zero barrels of crude oil in a single month for the first time in over 30 years

The UAE's Exit from OPEC

Against this backdrop of sustained crisis, the oil market is asking why the UAE chose this moment to break with OPEC and OPEC+. In an environment of production constrained by physical limitations in and around the Persian Gulf, the UAE would not benefit from incremental output in the near term. Many factors were surely weighed in this historic decision, but the fundamental reality is that the cartel's quota strategy is not aligned with the UAE's market objectives. The Emirates chose a strategically opportune moment to leave, since the decision will not materially affect Persian Gulf production volumes for as long as the Strait of Hormuz remains closed. Nonetheless, the withdrawal will free the UAE to ramp up production in line with its full potential — unconstrained — as soon as the Strait normalizes.

OPEC will not be severely affected in the short term, unless the UAE's decision triggers a domino effect among other members and associates, ultimately weakening Saudi Arabia's leadership of the group.

China's Position

China is one of the countries most severely affected by the shortfall in supplies from the Persian Gulf, making its actions critical to resolving the puzzle. Notably, China has been consolidating its naval strategy in the Indian Ocean over recent months by maintaining a sustained presence along trade routes vital to its commerce. In February and March 2026, it deployed destroyers to the Gulf of Oman and northern Indian Ocean to conduct joint exercises with the Russian and Iranian navies. Additionally, a "quiet" deployment of research and signals-intelligence vessels has been detected.

The Russia–Ukraine War and Its Energy Impact

The war between Russia and Ukraine is also playing a significant role in the global energy picture. Over the past week, Ukraine significantly intensified its long-range drone campaign targeting key Russian energy infrastructure in increasingly distant regions. The most significant damage reported involves the Tuapse refinery (Black Sea), operated by Rosneft, which has been the primary target and has sustained at least three strikes in the past two weeks. The most recent attack, on April 28–29, triggered a large-scale fire that damaged fuel storage tanks, pipelines, and the maritime terminal's loading arms.

Ukrainian drones reached refineries in the Ural region, approximately 1,500 km from the border, demonstrating a record-breaking strike capability. Successful attacks were reported against the Perm refinery and the Orsknefteorgsintez plant in Orsk between Wednesday and Thursday of the week. The Ryazan refinery — located roughly 180 km from Moscow, Russia's seventh-largest, also operated by Rosneft — sustained a fire following a drone strike that affected its operations. Beyond Tuapse, damage has been reported at the Sheskharis terminal in Novorossiysk (Black Sea), with earlier attacks against the port of Vysotsk (Baltic Sea) having disrupted refined product export logistics.

These strikes are estimated to have reduced Russia's crude processing capacity to historically low levels, with a decline of more than 15% of total refining capacity and approximately 5% of loading capacity at its terminals. In April 2026 alone, at least 21 successful attacks against Russian petroleum infrastructure were recorded. These strikes are eroding the ability of Russia — the world's third-largest producer — to fully capitalize on elevated prices that, ultimately, are what finance its war effort against Ukraine.

The United States: The Sleeping Giant

The United States remains the sleeping giant in this conjuncture. Though politically stung by gas prices at the pump exceeding $4 per gallon, the country is benefiting from the high prices its crude, product, and gas exports command — which is also enhancing its geopolitical leverage globally. Crude production, while still the world's highest, continues its gradual decline, offset by an equivalent increase in natural gas liquids output. Commercial crude and product inventories fell this week, but under current circumstances, they carry little weight in the oil market's perception. The Federal Reserve left interest rates unchanged, opting not to disrupt the current course.

Mexico: The Perfect Storm

President Sheinbaum stated on Thursday that she hopes state oil company Pemex and its Brazilian counterpart Petrobras will reach an agreement, following the Brazilian president's proposal of a partnership earlier this year. Sheinbaum indicated she would travel to Brazil to sign an agreement with President Luiz Inácio Lula da Silva and that she was considering possible dates.

Though not explicitly stated, the objective is to leverage Petrobras's deep-water exploration and production expertise to begin operations in the Mexican portion of the basin, which features multiple developments on the U.S. side of the Gulf of Mexico (America). Mexico's energy situation is precarious: rising natural gas and imported fuel prices, refinery failures, and declining production fields — a result of Pemex's chronic underinvestment driven by its extreme indebtedness — together constitute a perfect storm.

Price Dynamics

Oil prices closed the week below $110 per barrel, marking a week of extreme volatility: the June Brent contract reached $126 per barrel on Thursday. Iran's latest negotiating proposal, conveyed to the Trump administration through Pakistani intermediaries, appears not to meet Trump's demands and has been the primary driver of market pessimism.

The Brent and WTI benchmark crudes, at the close of markets on Friday, May 1, 2026, were trading at $108.17/BBL and $101.94/BBL, respectively — representing an increase of approximately 3% for Brent and nearly 8% for WTI compared to the prior week's close.

Venezuela

Fool's Gold

Despite the initial signals from the White House following the extraction of Nicolás Maduro — signals that briefly raised expectations of political and economic change — hard reality now appears to point, at least for the time being, toward an unlawful continuation of the Chavista regime under Delcy Rodríguez. The capricious manipulation of the Constitution, compounded by the interests of both foreign and domestic economic and political actors, has prevailed over the interests of a population that once again sees its hopes dashed.

Wages and Labor Conditions

Against this backdrop, significant expectations had built around an anticipated announcement of wage adjustments on Labor Day. On April 30, 2026, the regime announced an increase in the Comprehensive Minimum Income to $240 per month for active workers — a 26% raise. Pensions were set at approximately $70 per month.

This announcement proved a fresh disappointment for the majority of the population, who are barely surviving. Ultimately, however, it is the product of decades of economic mismanagement that make it nearly impossible to do otherwise, unless labor laws and the state's unmanageable payroll are brought into line with reality.

The base salary in bolívares remains frozen at 130 Bs. (worth less than $1 at today's exchange rate), meaning the bulk of workers' income continues to depend on indexed bonuses (Bonos de la Patria and Cestaticket). Predictably, trade unions and workers broadly rejected the adjustment and attempted to march in protest toward the presidential palace; the demonstration was halted by police, a clear signal that repression remains the government's preferred instrument.

The 'Great National Pilgrimage'

In what the regime dubbed the "Great National Pilgrimage" — which concluded on May 1 and drew sparse attendance — Rodríguez urged all political sectors to set aside their differences and called for the complete lifting of the economic sanctions still imposed on the country. In the regime's political lexicon, "setting aside differences" is synonymous with the absence of opposition. The interim president, for example, has offered no explanation for the slowdown in the release of political prisoners, nor has she provided any roadmap for a transition toward general elections and a return to political stability.

Economic Outlook

Various institutions project significant GDP growth for Venezuela in 2026, with estimates ranging from 7.4% (according to the UNDP) to 12% or even 14% (according to other sources and ECLAC), which would position Venezuela as one of the region's fastest-growing economies this year. It should be noted that, given Venezuela's extremely low economic base, any growth is proportionally significant — though not necessarily meaningful in absolute terms. These projections are grounded in the potential of the hydrocarbon sector, both in terms of volume and prices.

Investment Euphoria: Opportunities and Risks

The global energy situation has generated considerable excitement around investment opportunities in Venezuela, underpinned by the country's well-known geology, the recent amendments to the Organic Hydrocarbons Law (OHL), U.S. backing, and the issuance of a significant number of OFAC licenses that ease economic sanctions. There is also hope that the OHL's shortcomings will be addressed in implementing regulations expected to be published shortly.

In this regard, there is a wide divergence in the information circulating about oil production, as well as the sector's opportunities and limitations. Both the U.S. and Venezuelan governments continue to promote the advantages of investing in the country, even as large capital players remain markedly cautious.

Specialized consultants and several law firms have fueled the initial euphoria — particularly among small and mid-sized investors — perhaps making up for their inactivity in recent years. This euphoria is unfortunately also fed by the lack of transparency in how new blocks are awarded and contracts approved, in some cases under the Anti-Blockade Law. Dozens of oil executives have held meetings with the interim government: the Venezuelan Petroleum Chamber, domestic service companies, management groups, financiers, brokers, and law firms have all been seeking what might be called "low-hanging fruit." The Venezuelan Petroleum Chamber organized an event called "Venezuela Energética 2026" that drew a large crowd of interested parties, both domestic and foreign, and was attended by the new U.S. chargé d'affaires. There is a great deal of what might be called FOMO (Fear of Missing Out).

Sooner rather than later, this swirl of interest must be tempered by the realities of Venezuela's oil industry — one that has deteriorated over two decades of mismanagement and corruption. For example, reliable and relevant data for evaluating investment opportunities is scarce, outdated, and difficult to obtain. Institutionally, a lack of transparency about how contracts are awarded and who exercises the discretion implicit in the new OHL remains unresolved. In terms of legal certainty, the separation of powers is only just beginning to be discussed, with no indication of whether it will achieve its stated objective. And that is before even considering the deteriorated state of production infrastructure, the power grid, and competition for skilled human resources.

Given all this, we believe that, despite the euphoria, material investment in the near term will come primarily from companies already present in Venezuela or those with a sufficiently compelling specific objective to offset the current country risk — namely Chevron, Repsol, Maurel & Prom, ENI, and Shell.

Macroeconomics and the IMF

Macroeconomic imbalances persist that even the inflated revenues generated by elevated international oil prices have been unable to contain. Inflation remains out of control. The basic household consumption basket is estimated at around $692, making it clear that the new $240 minimum wage remains wholly insufficient to cover the basic needs of most of the population.

The restoration of relations with the IMF is, without doubt, a positive development and may open the door to access of nearly $5 billion in Special Drawing Rights (SDRs). However, close attention should be paid to the words of IMF Managing Director Kristalina Georgieva, who warned that "after the first flush of excitement comes the hard reality," noting that establishing a financial program with the IMF requires time, credible data, institutional reconstruction, and debt sustainability.

In the foreign exchange market, the gap between the official and parallel exchange rates stands at 29%, with the official rate having reached 490 Bs./$, representing a devaluation of 61% since the start of the year.

There also appears to be a considerable divergence between what the overwhelming majority of Venezuelans demand and expect and the U.S. government's vision of an electoral path, at least in the near term.

Petroleum Operations

Weekly Production

No adverse effects were reported from power outages or limitations in Orinoco Belt crude blending capacity. Diluent availability was satisfactory: 100 Mbpd were imported during April. Weekly production stood at 910 Mbpd, distributed geographically as follows:

•       West: 258 Mbpd

•       East: 108 Mbpd

•       Orinoco Belt: 544 Mbpd

            TOTAL: 910 Mbpd

The 6 Mbpd increase came from Urdaneta Oeste in Lake Maracaibo and the Orinoco Belt (2 Mbpd from Chevron and 2 Mbpd from minor operators).

Mixed Companies Under the New Contract Modality

The mixed companies operating under licenses with the new contract modality, in which the private minority partner serves as "Operator," produced the following volumes:

•       Chevron: 249 Mbpd

•       Repsol: 47 Mbpd

•       Maurel & Prom: 31 Mbpd

The Orinoco Belt mixed companies with Chinese and Russian partners (the Russian partner in PetroMonagas has relinquished its stake) produced:

•       PetroSinovensa: 91 Mbpd

•       PetroMonagas: 87 Mbpd

Refining and Exports

Domestic refineries processed 246 Mbpd of crude and intermediate products, yielding 70 Mbpd of gasoline and 77 Mbpd of diesel. The catalytic cracking unit at the Cardón refinery experienced technical failures and is currently offline.

In April, 950 Mbpd departed from the country's terminals, of which 180 Mbpd went to intermediate inventories in the Caribbean and 770 Mbpd corresponded to commercial sales:

•       United States: 370 Mbpd

•       India: 280 Mbpd

•       Europe: 120 Mbpd

The Venezuelan crude basket averaged $87.7/BBL.

[1] International Analyst

[2] Nonresident Fellow, Baker Institute