WAR IN THE MIDDLE EAST SHAKES THE OIL MARKET

 El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

In the 20th century, it was taken as gospel that political instability in the Middle East drove oil prices higher, primarily because developed nations relied on that region to meet their demand. As the 21st century has unfolded, the pieces on the energy chessboard have shifted to new positions, and market behavior has been very different. However, the large-scale military operation launched by the U.S. and Israel against Iran on the morning of February 28, 2026, and Tehran's immediate response with attacks across the region, put that new market paradigm to the test.

Although the timing of the attack coincides with the Jewish celebration of Purim—commemorating the salvation of the Jewish people from an extermination plot in ancient Persia—and with the month of Ramadan, a pillar of Islam for reflection and closeness to Allah, what is reported is that the long-planned attack was brought forward because a window of opportunity arose to eliminate the high command of the Islamic Republic of Iran.

The Pentagon and the Israel Defense Forces (IDF) have struck ballistic missile sites, nuclear facilities, and command centers of the regime. Israel claims to have carried out "decapitation" strikes against key regime figures, which enabled the elimination of Supreme Leader Ali Khamenei. Israeli intelligence detected a meeting of Khamenei with a significant number of high-ranking regime figures at his residential compound and, immediately, in broad daylight, the Israeli air force bombed the building, killing most of those in attendance. The news was officially announced in Iran, and the process to elect a new leader began.

President Donald Trump, upon announcing the start of the strikes, urged the Iranian people to "take control of your government," declaring that "the time for your freedom has come."

Iran has responded by launching waves of missiles and drones, not only against Israel, but also against U.S. bases in several allied countries: Bahrain, Qatar, UAE, Kuwait, Jordan, and even the British military base in Cyprus, in attacks that are surely part of a pre-determined response. Explosions have also been reported near residential areas in Dubai, Doha, and Kuwait. Iran has declared that all U.S. assets in the region are "legitimate targets."

Most airlines have suspended flights throughout the Middle East, and oil and LNG traffic through the Strait of Hormuz has come to a near standstill, having a considerable impact on the oil market and an even greater one on the liquefied gas market. It is important to note that 30% of globally traded crude passes through the Strait of Hormuz.

 

A Situation That Lays Bare the Market Narrative

The military preparations that have culminated in the attacks, which now draw almost the entire Middle East into the conflict, not only affect but also shape the oil market's perception of the future. Indeed, the military escalation between the U.S. and Iran and its potential impact on oil supply are calling into question the prevailing narrative that a global crude surplus exists. In fact, it is now considered that the recent production increase announced by OPEC+, if it materializes, is at best a counterweight to possible supply disruptions in the region. As if that were not enough, the formal declaration of "open war" between Pakistan and Afghanistan has further complicated the geopolitical situation in the region.

Oil prices thus close out February and begin March on a positive note for petroleum "bulls," with gains during the last trading week of the month, and promise to continue on the same course for the week ahead. Amid this war scenario, OPEC+ announced its decision to increase production by 206 MBPD starting in April, as a measure to mitigate the effects of the regional war. However, the cartel's ability to follow through is questioned.

OPEC+ Production Increase Approved for April 2026

PAÍS	INCREMENTO MBPD	CUOTA MBPD
Arabia Saudita	62	10.166
Rusia	62	9.637
Irak	26	4.299
EAU	18	3.429
Kuwait	16	2.596
Kazajistán	10	1.579
Argelia	6	977
Omán	5	816
Total	206	33.499

 

In any case, both baseline production and potential increases from Persian Gulf countries are subject to the constraints that the Strait of Hormuz may impose, beyond preventing tanker entry into the Gulf, which is already occurring. A buildup of tankers is already visible at both ends of the strait, and insurance companies have limited their coverage for those who decide to transit the Strait of Hormuz. The Iranians are broadcasting messages to vessels urging them not to pass through.

On the same geopolitical plane, events in Iran could reverberate in the other conflict zone, Russia and Ukraine, since the Khamenei regime is one of the main suppliers of military drones to Russia. Indeed, Russia's invasion of Ukraine marked its fourth anniversary: a shameful milestone accompanied by more than one million military and civilian deaths and injuries, and severe deterioration of both countries' economies. Nor should it be overlooked that the U.S. role as mediator in that conflict is losing weight, given its involvement in the Middle East conflict.

A Ukrainian drone attack on a critical pumping station in the Russian region of Tatarstan has disrupted the flow of crude to Hungary and Slovakia via the Druzhba pipeline. The disruption has forced both countries to activate their strategic reserves and seek alternative routes, such as importing non-Russian crude through the Adria pipeline from Croatia.

The global situation is one of extreme danger, as three or perhaps four nuclear-armed powers are involved in these regional conflicts and cannot entirely dismiss the risk of a miscalculation or wrong decision. It must not be forgotten that, although China has said little, a disruption of Iranian crude supply would have a disproportionate impact on its economy.

It is very difficult to speculate about the future of this conflict and its medium-term impact on the energy market—every twelve hours, we are surprised by events that were not on our radar. Nevertheless, President Trump has already hinted that the military operation may last four to five weeks, but that he is prepared for a longer duration.

 

Fundamentals

Given the magnitude of the military conflict that is only just beginning, the week's oil market fundamentals take a back seat to the increase in geopolitical risk, primarily driven by uncertainty.

In any case, we observe that the materialization of the projected increase in oil supplies is being delayed. Likewise, the more modest demand increase forecast by the IEA and banks appears to have diminished. Many analysts have noted both changes. For instance, the highly prestigious investment bank Goldman Sachs raised its Brent crude price forecast by $6, placing it at $60/BBL for the fourth quarter of 2026, even before the weekend's events. Of course, it is also not easy to predict the impact on demand of a sustained rise in energy prices.

OPEC+ is producing below its targets; the producers that analysts had flagged to increase crude supply have barely met the quantitative increases corresponding to the incorporation of newly announced fields. The lack of sufficient investment in base production is manifesting as an increase in decline rates, offsetting gains from new fields, typically in Brazil.

The U.S. keeps its production steady, at least for now. As for its commercial crude inventories, the Energy Information Administration (EIA) reported a significant increase of 16 million barrels. However, there appears to be a methodological issue, as the reports show outsized increases and reductions in inventory in recent weeks. As we indicated last week, we tend to wait for a trend to be established before validating the indicator. In any event, the market showed no reaction to the announcement.

 

Crude Oil Price Dynamics

During the last week of February 2026, oil prices experienced significant volatility, driven primarily by the escalation of geopolitical tensions and the delay or mitigation of the projected overproduction. At the close of the week, prices rebounded strongly following reports of the imminence of multiple military activities.

The situation points to two extreme scenarios: one of a war that could drag on for weeks, causing serious damage to the region's oil infrastructure and thus raising prices considerably; and another in which the Iranian regime falls and, after a chaotic transition, a pseudo-normalcy returns with a relatively rapid return to production levels and, eventually, the lifting of sanctions. In this latter scenario, oil supplies would increase and weigh on prices, with greater volatility and a medium-term reduction.

Benchmark crude Brent and WTI, at market close on Friday, February 27, 2026, were trading at $72.87/BBL and $67.02/BBL, respectively, reflecting an increase of approximately 1.5% compared to the previous week's close.

Note: At press time, Brent crude was trading at $77.47/bbl (+6.31%), having briefly approached $80/bbl during the session.

Venezuela

Recovery Without a Democratic Transition Can Only Be Partial

Although the Venezuelan situation remains dynamic, politically, economically, and in terms of oil, it was overshadowed internationally by the magnitude and potential repercussions of the Middle East conflict.

Political Situation

Politically, ambivalent moments are being experienced regarding repression and human rights. While the release of several imprisoned military personnel was confirmed and the remodeling of the Helicoide prison began for purposes other than detention and torture, at the same time, the regime's repressive forces confiscated the home of one of María Corina Machado's closest collaborators and detained activists from her VENTE party. It would appear that one head of the hydra that is the regime is trying to adapt to U.S. oversight, while another head seeks to maintain control through targeted repression. Nevertheless, protests of a different nature, mainly over wages, have taken place in several states across the country.

At the same time, the Attorney General and the People's Ombudsman, the main instruments of judicial repression, submitted their resignations, possibly as part of the transformation the regime seeks to project. Likewise, the interim president dismissed Alex Saab's wife from her ministerial post. According to rumors, other reshuffles may be in the works involving Interior Minister Diosdado Cabello and Defense Minister General Vladimir Padrino.

Somewhat surprisingly, at the annual "State of the Union" address, President Trump, in his now-familiar practice of highlighting key personalities to underscore annual achievements, introduced Enrique Márquez, one of the marginal candidates in the 2024 presidential elections and former vice president of the National Electoral Council (CNE). Márquez attended as a guest of honor, having recently been released from detention in Venezuela. 

Several theories arose from this introduction: one that he was being presented as a qualified candidate to head a new CNE, and another that he was being positioned as a transitional figure until the general elections. The latter would clearly not sit well with the opposition, which represents the majority of Venezuelans. Still, it could be a card played by the interim regime and the "opposition" represented in the National Assembly, to divide and weaken the majority opposition.

Economic Situation

On the economic front, some progress was made, though not without setbacks. The International Monetary Fund (IMF) classified Venezuela as a country of "intense fragility," an unflattering designation but useful for accessing special emergency financing and enabling certain financial transactions. These allowances are attributed to the stewardship of Treasury Secretary Scott Bessent.

Nearly $950 million was auctioned between January and February, with some difficulties in meeting the requirements of all phases of the fund flow. To reduce complications, hydrocarbon sale revenues will no longer need to pass through Qatar; they will flow directly to protected accounts at the U.S. Treasury Department. In fact, part of the March deliveries has already been received. 

Delays in implementing the foreign exchange auctions made it difficult to close the gap between the official and market exchange rates; despite the auctions being conducted at rates very close to the parallel market rate, the gap remained above 40%. The official rate closed the week at 420 Bs./$, representing a 4% weekly devaluation and 39% so far this year.

The most relevant news from an oil perspective were: first, the suspension of the auction of equipment belonging to U.S. company Halliburton that had been confiscated—the change came as a result of U.S. intervention to facilitate the smooth return of one of the largest and most wide-ranging service companies in the world; and second, the rumor of the suspension of 19 production sharing contracts (CPPs) signed before January 3, mostly awarded by Delcy Rodríguez.

 Apparently, the suspension may be due, among other reasons, to the contractors' financial and operational capacity and the origin and relationships of their owners and shareholders, which prevent these agreements from qualifying for OFAC-issued licenses. It is rumored that the review of the contracts is being conducted by a working group comprising U.S. Treasury technicians and PDVSA personnel.

It is thus clear that production increases over the coming months will be limited to investments made by currently active companies: Chevron, Repsol, Maurel & Prom, and possibly ENI, which is still weighing its options. In the specific case of Maurel & Prom, the recovery could be faster than anticipated, given that the first rig, the Maritime 42, has already been refurbished and is on its way to Urdaneta Oeste.

 

Oil Operations

Production was partially affected by power outages, unlike refining, which increased compared to the previous week. Representatives of Halliburton and other service companies have been establishing contacts with local firms to incorporate them into activities in the hydrocarbon sector and related activities.

Representatives of Shell met with the interim president to accelerate the development of the Dragon Field to supply natural gas to Trinidad, specifically to the Atlantic LNG plant. Shell indicated that its objective is to bring the field into production by the end of 2027.

Weekly Production

Occidente	243 Mbpd (Chevron: 102)
Oriente	111 Mbpd
Faja del Orinoco	526 Mbpd (Chevron: 138)
TOTAL	880 Mbpd (Chevron: 240)

 

National refineries processed 237 Mbpd of crude and intermediate products, yielding 79 Mbpd of gasoline and 70 Mbpd of diesel. The increase is mainly due to the startup of the distillation unit at El Palito.

According to the U.S. Secretary of Energy, by the end of February, revenues from the sale of Venezuelan hydrocarbons totaled $2.3 billion, averaging $53/bbl.

Among the notable features of February exports is the first Chevron sale outside U.S. territory, with a cargo sold to India. Additionally, 80 MBPD was sent to Europe and 20 MBPD to Israel. Chevron's total sales were 270 Mbpd, accounting for 36% of total exports of 736 Mbpd in February. However, 160 Mbpd dispatched remains as floating inventory and will therefore have no impact on revenues.

The increase in international prices raised the Venezuelan basket price to $59.2/BBL.

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

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

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

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

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

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

Geopolitics

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

The Supreme Court Ruling

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

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

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

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

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

Tension Between the United States and Iran

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

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

Other Regional Conflicts

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

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

Market Fundamentals

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

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

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

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

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

Crude Oil Prices

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

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

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

VENEZUELA

A Supervised Economy Toward Political Transition?

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

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

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

Visit from U.S. Southern Command

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

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

Economic and Exchange Rate Situation

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

Oil Licenses and Contracts

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

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

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

Amnesty Law and Political Situation

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

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

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

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

Oil Operations

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

Production and Export Data

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

·       West: 245 Mbpd (Chevron: 102 Mbpd)

·       East: 112 Mbpd

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

TOTAL: 885 Mbpd (Chevron: 239 Mbpd)

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

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

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

 

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

IEA vs. OPEC: The Market Chooses Pessimism

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

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

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

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

Munich Security Conference

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

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

Market Fundamentals

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

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

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

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

Geopolitics

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

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

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

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

Crude Oil Price Dynamics

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

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

VENEZUELA

Democratic Transition or Directed Auction

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

New Oil Opening

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

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

Visit of Energy Secretary Chris Wright

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

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

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

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

Assignment of New Oil Blocks

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

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

Economic and Exchange Rate Stabilization

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

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

Perspectives on Production and Elections

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

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

Amnesty Law and Release of Political Prisoners

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

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

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

Oil Operations

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

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

Production and Export Data

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

-   West: 252 Mbpd (Chevron: 102 Mbpd)

-   East: 112 Mbpd

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

TOTAL: 878 Mbpd (Chevron: 236 Mbpd)

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

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

Venezuelan basket prices have remained at $54/BBL.

[1]: International Analyst

[2]: Nonresident Fellow Baker Institute