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

Iran – USA: A Hostile Ceasefire

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

Armed conflicts in the Middle East continue to be the primary geopolitical focus for energy markets. The ceasefire agreements — both between Hezbollah and Israel, and between the United States and Iran — remain in place despite ongoing violations, which have now become part of the “new normal.” The parties in conflict are paying no heed to each other’s infractions, driven by a shared interest in reopening navigation lanes: the Strait of Hormuz, restricted by the Iranian Revolutionary Guard, and the Gulf of Oman, restricted by the U.S. naval blockade.

Iranian control of the strait had proven to be a formidable weapon in its strategy against the United States, disrupting energy markets and global economies alike. However, it had also allowed Iran to maintain a near-uninterrupted flow of crude oil to China, India, Pakistan, and other Asian buyers. As a result, the economic collapse caused by Israeli and U.S. strikes against Iran’s infrastructure was being cushioned by the continued stream of oil export revenues.

Caught off guard by this strategy, the United States responded by imposing a blockade on tankers and other vessels sailing to or from Iranian ports, effectively neutralizing Iran’s approach. The impact was twofold: Iran’s revenues were sharply reduced, and the country lost its ability to receive shipments of components needed for missile and weapons production, allegedly sourced from China. To date, more than 30 tankers have turned back following the immobilization and boarding of the Iranian vessel Touska, which had departed from China.

Fractures in the Regime and Signals of Negotiation

In a paradoxical turn of events, the possibility has emerged of brokering an agreement that would result in free passage through the strait, effectively sidelining the — never entirely clear — original objectives of the conflict. The initial negotiations and subsequent diplomatic feints appear to signal fractures within the Iranian regime. The Revolutionary Guard remains its most solid and radical pillar, despite the destruction of much of its air and naval capabilities. This forces civilian leaders to present a more “rational” face under external pressure while maintaining a precarious balance vis-à-vis the Guard’s hardliners.

Late on Saturday, Trump canceled the planned trip by his negotiators, Witkoff and Kushner, to Islamabad for a second round of talks. Trump may be convinced that the pressure is working, but the signals coming from Tehran are anything but clear. As we have noted in previous issues, big cultural differences between the parties make it difficult to establish a shared framework for negotiation — and, to date, no such framework appears to have emerged.

Impact on Energy Markets

In any event, markets — including energy markets — appear to view the unprecedented situation in Hormuz as a temporary disruption, preferring instead to focus on what they consider more structural: artificial intelligence, which currently commands market attention. Yet the physical evidence is unequivocal: the conflict in the Middle East is generating an economic tsunami that will manifest first as shortages of a range of commodities and products, driving up prices, disrupting supply chains, and ultimately generating inflation that will demand complex responses from energy producers and consumers alike. Central banks will be forced to define monetary policies that could reshape economies for months, if not years.

Without wishing to be alarmist, it is important to draw a critical distinction: energy being expensive is one thing; barrels of oil or molecules of gas being physically unavailable is quite another.

Russia, China, and the Reconfiguration of Supply

Meanwhile, Russia — not directly involved in the conflict — has benefited from rising prices, the easing of U.S. sanctions, and the resumption of oil flows through the Druzhba pipeline to Hungary and Slovakia. Russia has managed to stabilize its oil production at 9.1 million barrels per day. However, its refined products market has suffered as a result of ongoing Ukrainian drone strikes against its refining infrastructure.

China, for its part, may be poised to play a more prominent role, given its considerable influence over Iran at a time when Iran’s primary supply is faltering. There are reports that Arab nations have been pressuring China to cooperate in resolving the Middle East crisis. Furthermore, if it is confirmed that the vessel Touska was carrying sensitive military materiel from China, this would place both countries in an awkward position ahead of the Trump-Xi summit scheduled for May.

Geopolitical Fundamentals

Negotiations and Iran’s Internal Divisions

The latest cancellation of the U.S. negotiators’ trip to Pakistan reflects, at least from President Trump’s perspective, that the divisions within the Iranian regime and the success of the blockade on Iranian ports are complicating the country’s internal situation, making an agreement unlikely — though Trump did not rule out negotiations by telephone.

Iranian Foreign Minister Abbas Araghchi traveled to Moscow after meeting in Pakistan with army chief Asim Munir, with whom he shared what he described as a “viable framework to end the war,” while questioning the United States’ commitment to diplomacy.

Simultaneously, the authorization granted to the U.S. Navy to neutralize fast boats involved in laying naval mines or conducting disruptive activities in the Strait of Hormuz is a preparatory measure to secure the opening of that waterway. On another front, the ceasefire between Israel and Lebanon remains in effect. However, it has not prevented violent incidents: in response to a Hezbollah missile launch, Israeli forces eliminated fifteen members of the group on Lebanese soil.

The Transatlantic Rift: The U.S. and Europe

Over recent days, alongside the central issue looming over the Persian Gulf region, relations between the United States and Europe have grown increasingly strained. The Trump administration has adopted a “maximum pressure” posture that applies not only to its adversaries but also to its traditional allies, whom the president believes are unwilling to understand or confront the new global geopolitical realities. Europeans, for their part, caught up in their own domestic challenges, are beginning to recognize that the post-1945 order is dysfunctional and that they must define a new strategy centered on their own interests.

For the United States, Europe has become a burden rather than an ally. The European Union (EU) is attempting to distance itself from U.S. belligerence, prioritizing diplomacy and economic stability. While the U.S. maintains its offensive posture, EU leaders are meeting in Nicosia (Cyprus) with representatives of Arab countries to address peace in the region and security in the Strait of Hormuz — a policy that some analysts liken to the approach taken by France and the United Kingdom in the 1938 Munich Agreement with Italy and Germany, in an effort to avert World War II. Paradoxically, other analysts apply the same label to the White House’s stance on the Russia-Ukraine conflict.

On April 18, in Barcelona, the fourth “In Defense of Democracy” summit took place, with the participation of heads of state and political leaders from Latin America and Europe. Notable attendees included Spanish Prime Minister Pedro Sánchez, Mexican President Claudia Sheinbaum, Brazil’s Luiz Inácio Lula da Silva, Colombia’s Gustavo Petro, Uruguay’s Yamandú Orsi, and Chile’s Gabriel Boric. They presented a united front to what they described as the advance of far-right policies —specifically those of the Trump administration —to “protect democracy and European cohesion.” This is not an auspicious moment for the transatlantic alliance.

Sanctions on China and the Scale of the Supply Disruption

In line with the maximum pressure doctrine, the Trump administration announced on Friday that it is imposing economic sanctions on the Hengli Petrochemical refinery in the port city of Dalian, which has a processing capacity of 400,000 barrels per day (400 Mbpd), making it one of China’s largest independent refineries. Approximately 40 shipping companies and tankers involved in transporting Iranian oil were also sanctioned. These measures, which cut targeted firms off from the U.S. financial system and penalize any entity doing business with them, come just weeks before the planned meeting between Trump and Chinese President Xi Jinping in China.

We are witnessing the most significant oil supply disruption in recent world history. The conflict involving Iran has paralyzed approximately 20% of global oil and LNG flows. But beyond the inability to connect with international markets — which could be resolved through a negotiated agreement — serious damage has been inflicted on the region's production infrastructure, which will take years to repair. Consumer countries will have to grapple with financing the physical recovery of facilities, a supply gap, saturated inventories, and an unprecedented lack of global spare production capacity.

Indeed, the volume of crude oil and natural gas shut in or stockpiled and unable to reach the market has exceeded 500 million barrels (500 MMBBL) and 420,000 BCF, respectively. Damaged refineries have stopped supplying nearly 40% of gasoline and aviation fuel to Asia — primarily China, India, and Pakistan — and 30% of aviation fuel to Europe. As a concrete illustration of the repercussions, Pakistan has only 15 days of inventory remaining, and Lufthansa has canceled 20,000 flights for the remainder of 2026.

As mentioned in the introduction, the flow of oil from Russia to Hungary and Slovakia via the Druzhba pipeline resumed early Thursday, following the restoration of supply through Ukrainian infrastructure after a nearly three-month disruption. Slovakia and Hungary are the last EU member states still receiving Russian oil via this route.

The United States has done little to stimulate higher production; in fact, the Energy Information Administration (EIA) has reported a slow decline to just over 13.5 MMbpd. Drilling and hydraulic fracturing activity remains stagnant, despite rising crude prices and the pressing need for additional supply. Markets are questioning whether the production increases forecast by the International Energy Agency (IEA) will materialize.

Price Dynamics

Over the past week, international hydrocarbon prices experienced high volatility, with an overall upward trend driven by geopolitical uncertainty in the Middle East and discouraging progress in diplomatic negotiations to reopen the Strait of Hormuz.

Although crude oil prices registered a significant weekly gain of $15 per barrel, energy markets closed the week under uncertainty as it became clear that the United States is unwilling to engage in indirect negotiations and that the wartime footing appears to be gaining ground. As a result, energy markets opened Monday with an upward bias in hydrocarbon prices.

Benchmark crudes Brent and WTI, at market close on Friday, April 24, 2026, were trading at $105.33/BBL and $94.40/BBL, respectively, representing increases of more than 15% from the previous week’s close.

Venezuela

More of the Same

While the caretaker administration of Delcy Rodríguez attempts to consolidate its hold on power under the cover of purported U.S. pressure to establish an electoral timeline, Venezuela is mired in a critical phase of stagnation in its long-sought political transition. The caretaker administration is struggling to stabilize an economy showing faint signs of recovery. At the same time, institutional fragility persists, and uncoordinated decisions regarding foreign exchange availability, public spending, liquidity restriction policies, and exchange rate intervention persist.

Although a doubling of foreign-currency availability — driven by higher oil prices — managed to narrow the exchange rate gap from 40% to 30%, the goal of containing inflation remains elusive, manifesting instead as a generalized rise in prices.

The caretaker president formally requested that the International Monetary Fund (IMF) grant access to the $5 billion in SDRs (Special Drawing Rights), an international reserve asset created by the Fund.

The “Great Pilgrimage for a Venezuela Free of Sanctions and at Peace”

On the political front, the caretaker government’s attention has been focused on what it has branded the “Great Pilgrimage for a Venezuela Free of Sanctions and at Peace”: a 13-day mobilization convened by caretaker President Delcy Rodríguez, which began — not by coincidence — on April 19, 2026, and is scheduled to conclude on May 1 in Caracas. According to the regime, this initiative aims to demand the full lifting of international sanctions and to promote national unity. However, it appears to be more of an out-of-cycle electoral campaign.

The Rodríguez siblings and other senior officials have led different routes and activities at various strategic points across the country:

•      Delcy Rodríguez has led events in states such as Zulia (starting point of the western route), Falcón, and Lara, visiting landmarks including the “La Flor de Venezuela” monument and the Sanctuary of the Divine Shepherdess.

•      Jorge Rodríguez, President of the National Assembly, began his tour in the state of Amazonas and has participated in mobilizations in Bolívar, Lara, Portuguesa, and Delta Amacuro. In his speeches, he has emphasized that the march is a process of “spirituality and healing” for the country.

•      Figures such as Diosdado Cabello have led segments departing from border states such as Táchira.

With clear electoral objectives, the design of the mobilizations seeks to give the Chavista revolution a new face by imbuing it with political-religious content and subliminally evoking analogies to the Camino de Santiago pilgrimage and the procession of the Divine Shepherdess. The visual branding is laden with symbolism and is widely interpreted as a search for a new identity and electoral repositioning. The traditional red of Chavismo has been replaced by blue and white — the colors associated with the Virgin Mary. No PSUV party flags or partisan symbols are on display; rather, there is a clear emulation of María Corina Machado’s 2024 campaign aesthetic.

The mobilization is expected to reach Caracas on May 1, coinciding with a possible announcement of a minimum wage increase by the executive. The initiative has drawn criticism from opposition sectors and labor guilds, who question the expenditure on propaganda amid the wage crisis and the deteriorating public services affecting the country.

Delcy Rodríguez also announced the end of the Amnesty Law. This statement is not only legally dubious but constitutes an obvious violation of the separation of powers, a practice that has become commonplace across all incarnations of Chavismo.

The Maduro Case in the United States

Regarding the criminal proceedings against Nicolás Maduro and Cilia Flores in the United States, U.S. authorities reversed an earlier decision and will now permit both defendants to pay their attorneys using Venezuelan funds for their defense in the drug trafficking case filed against them in New York. This reversal removes an obstacle that had stalled the proceedings and, according to legal analysts, introduces a variable that could have significant implications for the course of the case — specifically, it eliminates the appeal based on lack of adequate legal representation that the defendants were apparently preparing.

Oil Operations

National Production

This week’s production stood at 904 Mbpd, with no adverse effects reported from power outages or limitations in the blending capacity of Orinoco Belt crude. The geographical breakdown was as follows:

Western Region	256 Mbpd
Eastern Region	108 Mbpd
Orinoco Belt	540 Mbpd
TOTAL	904 Mbpd

 

OFAC-Licensed Joint Ventures and LOH Contracts

Joint ventures operating under OFAC licenses and new contracts established under the recently amended Hydrocarbons Organic Law (LOH) produced the following volumes:

Chevron	247 Mbpd
Repsol	47 Mbpd
Maurel & Prom	29 Mbpd

 

Orinoco Belt joint ventures with Chinese and Russian partners produced:

PetroSinovensa	91 Mbpd
PetroMonagas	87 Mbpd

 

Drilling Activity

Baker Hughes reports two active drilling rigs in the country, both operated by Chevron. However, it is known that additional rigs are operable. A jack-up unit brought in by the Chinese company Concord Resources to operate in Lake Maracaibo suffered an accident that caused an oil spill; the unit has been used exclusively for workover operations on existing wells, with considerable difficulties due to its physical characteristics.

There is also a lake drilling rig at Urdaneta Oeste, contracted by Maurel et Prom, which is conducting workover operations ahead of its planned drilling campaign. Finally, a rig scheduled to drill in the Orinoco Belt (Junín) for PetroRoraima has experienced numerous setbacks and has been unable to commence drilling.

Refining and Exports

National refineries processed volumes of crude and intermediate products, with a diesel yield of 75 Mbpd. Gasoline production does not cover domestic market requirements.

Month-to-date exports show a strengthening of shipments to the United States, at approximately 330 Mbpd, alongside a decline in dispatches to India. Total exports for April are projected at 740 Mbpd.

The Venezuelan crude basket averaged $86.50/BBL.

[1] International Analyst

[2] Nonresident Fellow, Baker Institute

The Strait of Hormuz Blockade: The Collapse of Negotiations

  El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

The brief euphoria that swept global markets following Iranian Foreign Minister Abbas Araghchi’s announcement that the Strait of Hormuz would remain open to all commercial vessels during the ceasefire with the United States was short-lived.

On Saturday morning, Iran announced — according to CNN — that it was reimposing restrictions on the Strait of Hormuz, alleging that the United States had “betrayed its trust,” a clear reference to the continuation of the blockade announced by Trump. The situation deteriorated further by Saturday evening, when a tanker and a container ship were struck by projectiles launched by units of the Iranian Revolutionary Guard. Trump convened a Situation Room meeting to address the worsening conditions.

Oil markets were left wondering whether the second round of U.S.–Iran talks would take place on Monday, but hopes of reaching an agreement to end the 45-day blockade of the Strait of Hormuz are fading in the face of the latest developments obstructing free navigation — the result of the dual blockade: Iran at the Strait of Hormuz and the United States in the Gulf of Oman.

Iran’s announcement of the reopening of the strait came after Trump managed to broker a fragile ceasefire between Israel and Lebanon, which had driven the ICE Brent price back below $90 per barrel. Any new negotiations, if they materialize, will be decisive for the oil market: a breakdown would intensify the IEA’s warnings of an imminent fuel shortage in Asia and Europe.

To date, approximately 470 MMBBL of crude oil and around 350,000 BCF of natural gas have been withheld from global supply — a volume that will take months to normalize.

Market Dynamics: Physical Prices vs. Futures

The oil market operates on two types of prices: futures and physical crude prices. Under normal circumstances, the two tend to move in tandem, responding to similar signals. The current situation, however, is exceptional. The shortage of physical barrels available for immediate delivery poses a direct threat to supply chains. To avoid operational disruptions, buyers have been willing to pay substantial premiums for near-term deliveries. In today’s spot market, that premium has reached as much as $30 per barrel. Refineries are paying whatever the market demands to avoid cutting their runs; that desperation is reflected in physical crude prices, not in futures.

Markets are reacting not only to current flows but also to the possibility of further disruptions. In short, oil is rising because markets are pricing in uncertainty: reduced tanker efficiency and a delayed recovery in production. As long as the supply chain remains unstable, buyers are prepared to pay higher prices to secure supply.

Geopolitical Fundamentals

A global realignment of power characterizes contemporary geopolitical dynamics. Energy has taken on an increasingly central role as a fundamental instrument of statecraft. After a period of high volatility, the current environment points to a renewed emphasis among nations on energy security — driving a strategic reallocation of investment, both geographically and through the urgent prioritization of renewable energy development, now regarded primarily as a mechanism for strengthening energy resilience rather than solely as a response to climate change.

Hydrocarbon producers outside the Middle East are watching the unfolding crisis among the major Gulf producers with a mixture of astonishment and paralysis, seemingly unable to act to mitigate the supply shock. Over the past six weeks, more than 60 drilling rigs have been deactivated worldwide; fewer than half belong to Gulf producers, whose shutdowns are at least understandable. This inactivity lengthens operational response times for new investment and deepens uncertainty around global energy supply.

According to OPEC secondary sources, Gulf producing countries were forced to cut their output by nearly 8.0 million barrels per day. The hardest hit were Iraq and Kuwait: Iraq due to the lack of alternative export routes, and Kuwait because damage to its refining infrastructure has significantly reduced its processing capacity.

The normalization of the global economy will depend on the outcome of peace talks between the two parties in conflict — a prospect that does not look promising at this stage. Economists suggest that the economic damage stemming from the war with Iran is likely to persist even after the strait returns to normal operations.

Crude oil prices fell during the week but remained well above pre-war levels and are expected to ease only gradually, which will keep upward pressure on gasoline and other refined product prices. Everything depends on how the dual blockade is resolved and on the outcome of a potential second round of negotiations. As with the supply chain disruptions caused by COVID-19, restoring order could take a very long time.

Multiple factors will keep crude prices elevated even after the blockade is lifted:

•       Countries that drew down their inventories during the conflict will seek to replenish them once navigation is restored, sustaining elevated oil demand.

•       The willingness of shipowners and captains to make the passage will need to be assessed, as will the availability of insurance coverage adapted to the new risk environment.

•       Oil facilities across virtually every country in the region sustained damage during the fighting; the full extent is still being assessed and will undoubtedly continue to affect the supply of not only crude oil but also natural gas and petrochemical products, including fertilizers.

The very fact that the strait was closed demonstrates that it could be closed again at any time. This risk will likely be permanently embedded in oil prices and will shape investment decisions and operational strategies for major producers.

Proposals to Reduce Dependence on the Strait of Hormuz

This painful episode has spurred creative proposals to loosen Tehran’s grip on Gulf oil and gas exports. One of the most discussed topics is the construction of new pipelines. The most strategically compelling option is a route that bypasses not only the Strait of Hormuz but also the Bab-el-Mandeb Strait and the Red Sea — a concept with sound economic logic. Another proposal involves a pipeline to carry crude to the Mediterranean via the Israeli port of Haifa, though that would introduce an entirely different set of challenges.

Russia, China, and the Energy Realignment

Russia, meanwhile, has held its production steady at around 9.1 MMBPD, earning higher revenues thanks to elevated international prices and the suspension of U.S. sanctions, at least through May 16. In Hungary, despite the new government’s anti-Russian orientation, Prime Minister-elect Peter Magyar confirmed that supplies via the Druzhba pipeline — the main conduit for Russian oil to Hungary, Slovakia, and the Czech Republic — could resume as early as next week.

The United States has accused China of supplying medium-range cruise missiles to Iran. China has rejected the allegations and adopted a guarded posture, while working to manage the challenges posed by the U.S. blockade in the Gulf of Oman and monitoring the potential economic fallout that the conflict could inflict on the American economy.

The Rift Between the U.S. and NATO

As the year progresses, the relationship between Trump and NATO is showing deep structural fractures. Tensions no longer center solely on defense spending; they extend to the refusal of European allies to participate in conflicts outside their own territory, in particular the recent U.S.–Israel war with Iran.

Trump has labeled NATO a “paper tiger” and stated openly that he is considering withdrawing the United States from the alliance, arguing that the bloc “wasn’t there” when Washington needed it during the Middle East conflict. After allies initially declined to join the offensive against Iran, Trump recently rejected a NATO offer to help secure the Strait of Hormuz, telling the alliance to “stay out of it.”

In response, leaders such as UK Prime Minister Keir Starmer and NATO Secretary General Mark Rutte have defended the alliance’s effectiveness. At the same time, France has reiterated that NATO is a Euro-Atlantic security alliance, not a vehicle for operations outside international law in the Persian Gulf. Paradoxically, Europe is among the regions most severely affected by the conflict.

Brazil: A More Competitive Presidential Race

On a separate note, Brazil’s presidential election — scheduled for October — is shaping up to be more competitive than anticipated. Opposition senator Flávio Bolsonaro, son of former president Jair Bolsonaro — currently serving a prison sentence — has drawn level with President Luiz Inácio Lula da Silva in recent polling. Flávio Bolsonaro’s rapid rise in the polls makes it increasingly difficult to predict the outcome in a country that plays a critical role in global crude supply.

PRICE DYNAMICS

Oil prices ended the week sharply lower, with ICE Brent crude trading near $90 per barrel, following a significant decline of nearly 10% on Friday. The sell-off was driven by optimism surrounding a potential resolution in the Middle East and the reopening of the Strait of Hormuz.

The same sentiment lifted major equity indices, which rallied after Iran’s Foreign Minister declared the Strait of Hormuz “fully open” during the Israel–Lebanon ceasefire period. Markets will now react to fresh developments and to the outcome of negotiations expected to take shape in the coming days.

The Dow Jones, Nasdaq, and S&P 500 rose 1.7%, 1.3%, and 1.1%, respectively, in the final 30 minutes of Friday’s trading session, with the Dow adding 850 points. The S&P 500 and Nasdaq set new all-time highs for the third consecutive day. This market euphoria will need to be reassessed in light of whatever agreements — or lack thereof — emerge going forward.

Closing Prices — Friday, April 17, 2026

Brent (ICE): $90.38/BBL  |  WTI: $84.98/BBL

Weekly change: Brent −5%; WTI −11% vs. prior week’s close.

VENEZUELA

Oil and Gas Assets Change Hands

So far in April — and particularly over the past few days — Venezuela has begun to show signs of a partial, haphazard economic opening, unfolding within a political environment that continues to resist it. The regime’s restoration of ties with international financial institutions, long dismissed as agents of “imperialism,” represents a significant new variable in the murky landscape that has been taking shape since January 3.

Within the framework of the so-called “recovery” phase — the second stage of the Trump-Rubio plan — a range of unorthodox processes has emerged, particularly in the hydrocarbons sector. Asset swaps and direct area assignments, with little to no public disclosure of their terms, are raising legitimate concerns.

There is also a proliferation of visits by executives and technical teams seeking meetings with the Interim Government, PDVSA, joint ventures, and contractors to review oil and gas fields and facilities in search of opportunities. However, clear terms of participation have yet to be established. The most notable developments in this space are as follows:

•       Chevron–PDVSA Asset Swap. U.S. major Chevron signed key agreements with PDVSA to expand its operations in the Orinoco Belt. As part of the asset swap, Chevron increased its stake to 49% in the PetroIndependencia joint venture and assumed rights in the Ayacucho 8 area, while relinquishing Blocks 2 and 3 in the Deltana Platform — which contain gas prospects — along with an oil block in Lake Maracaibo (PetroIndependiente LL-652). Block 2 contains the giant Loran Field, discovered by PDVSA in the 1980s; Block 3 holds an exploratory well that encountered non-commercial gas at the time.

The Lake Maracaibo field, operated by Chevron (LL-652) and part of this transaction, was awarded to the company in the third round of Venezuela’s Oil Opening in 1996, with a signing bonus of $250 million. Chevron built platforms and infrastructure capable of handling 90 Mbpd, but production never exceeded 16 Mbpd.

In summary, the swap allows Chevron to clean up its portfolio by exiting a field whose potential was overestimated. For PDVSA, it clears the way to award Block 2 to the British company Shell, which will operate the unified development of the cross-border reservoir from Trinidad, with combined reserves exceeding 10 TCF.

•       Direct Assignments to Shell. PDVSA and British major Shell signed a Framework Agreement and a Technical-Financial Alliance for the integrated development of the Punta de Mata Division in Monagas state. The agreement focuses on the Carito and Pirital production units to boost oil and natural gas output, and includes the management of gas currently being flared or vented. Shell is also moving toward the start of development of the Dragon Field, located north of Paria, to supply natural gas to Trinidad.

•       Restructuring of the PetroQuiriquire Operation. Repsol announced a preliminary agreement to assume operational control of the PetroQuiriquire joint venture, under Article 36 of the newly revised Organic Hydrocarbons Law (OHL). Repsol plans to increase production by 50% within 12 months, amounting to approximately 22 Mbpd.

Restoration of Relations with International Financial Institutions

The International Monetary Fund (IMF) and the World Bank (WB) formally announced on April 16 the resumption of their relations with Venezuela, ending a suspension that had been in place since March 2019. The move enables the IMF to begin collecting basic data and conducting a comprehensive assessment of the Venezuelan economy — something that had not occurred formally since 2004.

The decision was taken after consultation with IMF member countries representing a majority of the organization’s voting power. The restoration of ties constitutes official recognition by the international financial institutions of the interim government of Rodríguez. Venezuela could regain access to its Special Drawing Rights, estimated at approximately $5 billion, and apply for new financial assistance programs.

These announcements, together with the issuance of operating licenses to the Central Bank and other state-owned banks, have allowed the monetary authority to access overseas accounts and inject more foreign currency into the domestic market. More than $1 billion offered over the past month has generated positive expectations of stabilization among investors.

Despite the ongoing inflationary crisis — evidenced by price increases, particularly for necessities — the foreign exchange market in the most recent week (ending April 19, 2026) remained relatively stable at the official rate of 481 Bs./$. However, a significant gap of around 28% persists with the parallel market.

Nonetheless, concern is growing over the limited progress in the so-called “transition” phase, as the population perceives no change in purchasing power, minimal movement on the release of political prisoners, and a regime reshuffle that amounts to little more than recycling ministers and other officials — not an encouraging sign. New investors, genuine or opportunistic, appear to be multiplying in the media and at regime events, but translating that interest into real investment will take time. The “guardianship” arrangement appears to need a course correction.

MCM in Europe

While all of this was unfolding in Caracas, opposition leader María Corina Machado (MCM) was completing a successful tour of Europe. She met with business leaders and politicians, including the heads of government in the Netherlands, France, and Italy, before concluding her trip in Spain. Although details about the objectives and outcomes of the tour remain limited, one can infer that in each country she secured political backing for the battle ahead: achieving political transition through early elections — serving as indirect pressure on the U.S. government while avoiding unnecessary friction.

In Madrid, at the Puerta del Sol, MCM addressed a massive rally. The square overflowed into the surrounding streets, packed with Venezuelan migrants who undoubtedly relived the emotions that MCM must have felt as she traveled across Venezuela in 2024 — demonstrating, to insiders and outsiders alike, something difficult to put into words: the political legitimacy that comes from the hope for change that her message inspires.

Petroleum Operations

Venezuela’s average production in March, according to OPEC secondary sources, stood at 988 thousand barrels per day (988 Mbpd), a discrepancy of 100 Mbpd compared with official figures. In February, that gap was only 25 Mbpd. One possible explanation is that the OPEC figures include Venezuelan condensates blended with produced crude, and that the volume of diluent used in some Belt wells is being underreported. Even so, these factors alone do not fully account for the gap reported for March. A monthly production increase of over 80 Mbpd appears excessive and is expected to be revised downward in the coming months, as has happened on previous occasions.

No adverse effects on production from power outages or Orinoco Belt crude blending capacity constraints were reported. This week’s production stood at 897 Mbpd, distributed as follows:

West	252 Mbpd
East	109 Mbpd
Orinoco Belt	536 Mbpd
TOTAL:	897 Mbpd

 

Joint ventures operating under OFAC licenses and under the new arrangements established in the recently amended Organic Hydrocarbons Law, which allows the private minority partner to be contracted as “operator,” are producing the following volumes:

Chevron	245 Mbpd
Repsol	47 Mbpd
Maurel et Prom	27 Mbpd

 

Orinoco Belt joint ventures with Chinese and Russian partners produced the following:

PetroSinovensa	90 Mbpd
PetroMonagas	88 Mbpd

 

Domestic refineries processed 245 Mbpd of crude and intermediate products, yielding 76 Mbpd of gasoline and 78 Mbpd of diesel.

Ammonia/urea and methanol production at the José petrochemical complex is running near nominal capacity, with no gas supply constraints; SuperOctanos remains offline due to a shortage of butane. The Morón Complex has been unable to restart due to insufficient gas supply.

Mid-month exports are estimated at 740 Mbpd, with the largest share destined for the U.S. market; approximately 60 Mbpd of residual fuel is estimated to be exported during the month. April exports include the backlog of crude that accumulated in inventories during the naval blockade at the end of last year.

Average price of the Venezuelan crude basket: $85.3/BBL

^[1] International Analyst

^[2] Nonresident Fellow, Baker Institute