OIL PRICES RISE IN RESPONSE TO ROBUST MARKET SIGNALS

 El Taladro Azul  Published  originally in Spanish in  LA GRAN ALDEA

M. Juan Szabo and Luis A. Pacheco  

For the first time since the beginning of April, oil prices ended the week showing a gain, without exceeding the $90/BBL barrier (for Brent Crude). The EIA reported a reduction in US crude oil inventories, which coupled with rising tensions in the Middle East has provided support to oil prices. On the other hand, a slowdown in US manufacturing renewed hopes of an interest rate cut in June, although signs on this remain ambiguous.

Geopolitics

Tensions in the Middle East rose after Israel increased nighttime airstrikes on Rafah after announcing it would evacuate civilians ahead of the assault on what it claims is a stronghold of the armed group Hamas. For now, the Israeli government appears to be ignoring the Biden administration's advice to wait, and negotiations over the hostages continue. Additionally, the Houthi rebel group resumed attacks on shipping, after taking time to recover from US and UK bombing. The MV Andromeda Star, a tanker traveling in the Gulf of Aden, was attacked on Thursday, and suffered minor damage. This appeared to be the continuation of an attack on the MV MAISHA, an Antigua/Barbados-flagged cargo ship operated by Liberia, which was successfully defended by the US Navy. In any case, threats to shipping through the Red Sea remain in force.

In this context, it is worth mentioning the wave of protests around the world against Israel, particularly in US universities. These movements of students and faculty have left university authorities trapped between the defense of the right to free expression and the anti-Semitism that seems to have awakened in those august institutions; a governance crisis that further complicates the electoral panorama of the northern country.

On the other hand, the changing situation on the Russian/Ukrainian war front complicates the geopolitical situation in that Central European region. Moscow has renewed attacks on Ukraine's energy facilities, causing power outages and calls for the population to save on electricity consumption. During the week of April 18, Ukrainian missiles hit a Russian military airfield on the Crimean Peninsula (annexed by Moscow in 2014), managing to destroy part of the air defense equipment, as reported this Thursday by Ukrainian military intelligence. On Saturday the 27th, it was reported that Ukraine had attacked the Ilsky and Slavyansk oil refineries, in the Russian region of Krasnodar, causing fires at the facilities. The approval of $65 billion in US military aid gives important support to the Ukrainian counteroffensive.

Fundamentals

Regarding the discipline of compliance with OPEC+ cuts, Iraq reaffirmed its intention, after months of 200 MBPD of overproduction, to comply with OPEC+ guidelines. Iraq is committed to limiting its oil exports to 3.3 million b/d until the end of the year, regardless of the outcome of the OPEC+ meeting in early June. For its part, US production remains unchanged, even though the number of active rigs, according to the Baker Hughes report , was reduced by 6 rigs.

U.S. oil and gas industry consolidation continued at a high pace in the first quarter, with a geographic focus on the prolific Permian Basin. But activity lost momentum in the second quarter, according to a report from Enverus Intelligence Research. 

On another page, the demand for crude oil has not behaved as predicted by the International Energy Agency (IEA), particularly in developed countries. A greater reduction was expected based on increases in efficiency and replacement of energy generated by fossils with renewable energy. In developing and underdeveloped countries, demand has risen proportionally to the increase in GDP per capita. Supply, on the other hand, has only grown in some countries such as: Brazil, Canada and Guyana, but below the growth in demand.

US manufacturing statistics indicated a reduction in activity, but US Treasury Secretary Janet Yellen, in an interview with Reuters, flagged the possibility of revising first-quarter GDP growth to higher levels. Data released on Friday revealed that the personal consumption (PCE) index, excluding food and energy, rose 2.8% in the year ending in March, while the PCE indicator of all items rose 2.7%., both slightly above forecasts. Both measures rose 0.3% month-over-month; some read this as a sign of a rate cut on the horizon.

The fundamentals continue to indicate a market without changes in the demand / supply equation, which supported prices, which also benefited from the geopolitical tailwind.

At the close of the markets, on Friday, April 26, the Brent and WTI crude markers were trading at $89.50/BBL and $83.85/BBL, respectively.

In other news

·      Chevron's Permian Basin production in the first quarter fell less sequentially than the 2%-4% it had forecast three months ago, but it still expects to remain on a growth trajectory in the second half of 2024, its CEO said. , Mike Wirth, April 26. The 859 Mboepd (thousands of barrels of oil equivalent per day) that Chevron produced in the basin during the first quarter, were just 1% less than the volumes of the fourth quarter of 2023. A decrease that should persist in the second quarter of 2024 due to the company's intention to increase its inventory of drilled but incomplete wells during the first half of the year.

·      Furthermore, Wirth stated that Chevron is not affected by the reactivation of sanctions on Venezuela. “We are not investing new capital in Venezuela at this time,” he said. “All the spending is self-financed with cash flow from operations. “We have been extracting oil and bringing it to the United States, which has been helpful to the American refining system, not only ours, but others as well.” Wirth stated that, last year, Venezuela's production increased in the joint ventures in which Chevron participates from approximately 120,000 b/d to approximately 180,000 b/d; a figure that looks inflated.

·      Payara, ExxonMobil's third Guyana producing field, came online in November 2023 and was producing at its full nameplate capacity of 220,000 b/d in January. It now appears to have boosted Guyana's total output even further, it suggested the company's first quarter earnings report, released April. 26.

 

VENEZUELA

THE CAROUSEL OF ELECTIONS, SANCTIONS, ECONOMY, AND REPRESSION

Political Aspects

The surprising agreement around the candidacy of Edmundo González Urrutia has once again left the regime in disarray. Not knowing the legitimacy of González Urrutia as a candidate is more complicated than simply preventing Corina Yoris from accessing the CNE registration system, or the disqualification of María Corina Machado. Any trick attempted against the opposition candidate, which is never ruled out, could have a high international cost, including the relation with President Lula da Silva or President Petro. There is also the repeated issue of the International Criminal Court and its investigations into the regime, and the repressive actions that continue despite this.

Sanctions and their effects

Regarding the reactivation of sanctions on the businesses of PDVSA and its subsidiaries, by replacing General License 44 with LG 44-A, we are in the transitional period of 45 days, which OFAC established to wind-down the activities authorized under LG 44. Let us remember that an individual license can be requested from OFAC, now or later; This new requirement could delay or suspend some activities currently in development.

The agreements that PDVSA has signed with private companies for the development of oil and gas fields, such as Repsol, Maurel & Prom will have to wait for authorization or confirmation that they only require a comfort letter from OFAC. The potential delay in receiving approval will limit the generation of new production potential for 2024.

The most important project, of those announced so far, is undoubtedly the development associated with the extension of the PetroQuiriquire block in western Venezuela. Repsol would have the opportunity to increase production by 50 Mbpd in the next 2 years to 3 years, if they are willing to invest around MM$2.,000.

The most significant impact of the new conditions will be on crude oil sales, which LG44 allowed to be carried out in legitimate markets, considerably reducing the discount required to place “sanctioned” crude oil in “gray” markets. For example, it is not known whether the Indian company, Reliance Industries Limited (NSE: RELIANCE), will continue buying Venezuelan crude oil covered by the transition period, or wait for a new authorization from OFAC. In summary, we project a hiatus in the sales prices achieved starting in October 2023, as well as in new investment activities in production fields and their respective marketing.

 

Electoral Economy

Meanwhile, the management of economic variables is developing as expected, but with restrictions. It is necessary to keep inflation at bay, keeping the exchange rate relatively constant, limit or avoid the issuance of money, and adjust the level of public spending to electoral needs. These requirements, with limited financial resources, are difficult to meet in parallel. In fact, public spending, although still high, has shown a clear decreasing trend and the exchange rate is beginning to rise discreetly, for now.

 

Hydrocarbon sector operations

Oil production began to reflect the results of the drilling activity in PetroMonagas and PetroIndependencia with an increase of 4 Mbpd. Thus, this week's production reached 778 Mbpd, distributed throughout the country, as follows:

•          West                155 (Chevron 58)

•          East                 146

•          Orinoco Belt     477 (Chevron 90)

•          TOTAL              778 (Chevron 148)

The mixing operations of the Merey 16 segregation continued to have problems due to the lack of enough light crude oil.

Refining reached 212 Mbpd, with a gasoline production of 64 Mbpd, and around 74 Mbpd of diesel. The import of gasoline through barter maintained high levels, anticipating the possible hiatus due to the termination of LG44. The higher level of refining is due to the start-up of distillation unit No. 3 in Cardón.

Crude oil exports are also being accelerated in preparation for potential restrictions; However, we observed a decrease in tankers approaching the Jose terminal. The export of products is, from the perspective of volume availability, guaranteed by the higher levels of processing in Paraguaná. Our current estimate for average exports for the month is 660 Mbpd and 60 Mbpd for crude oil and products respectively.

THE MARKET ABSORBS THE IMPACT OF GEOPOLITICS

El Taladro Azul  Published  originally in Spanish in  LA GRAN ALDEA

M. Juan Szabo and Luis A. Pacheco  

The history of conflicts in the Middle East has traditionally indicated that the noise of cannons induced price increases due to the risk of supply. But the events of recent months seem to indicate that these atavisms have lost relevance. The swing in oil prices recently undoubtedly reflects the uncertainty surrounding the conflict in the Middle East, particularly the possibility of an extended confrontation between Israel and Iran. In the absence of direct impacts on oil operations, however, the market has reacted with qualified realism.

Initial reports of Israeli attacks on Isfahan province, in response to Iranian attacks, sent Brent above $90/bbl, before falling back to $86/bbl, after statements from Tehran that appeared to rule out a military response. On another scale, but relevant in these latitudes, the reactivation of oil sanctions against Venezuela had a similar effect, although at a much lower level. The initial market reaction to the announcement was of an upward trend, however, when the text of the new conditions was disclosed, the market ruled out its relevance.

Middle East

Israel responded to last week's Iranian attack with a timely and precise attack on the heart of Iran: Isfahan, a region that is home to important Iranian military infrastructure, such as a large air base, a large missile production complex and several nuclear facilities. The attack, not confirmed by Israel, was apparently intended to demonstrate that Israel can bypass Iranian defenses and hit targets inside that country with precision. It served as a nominal response to the Iranian attack, but without escalating the situation to an all-out war between the two countries and their neighbors. Seen in a more global context as well, it also raises questions about the effectiveness of anti-aircraft defense of Russian origin. In all events, the result of this semi-skirmish is the verification that Israel's defense systems passed the test, while Iran appeared vulnerable.

Additionally, the defense of Israel during the Iranian attack had the cooperation of Jordan, Egypt, and Saudi Arabia. This cooperation should not be taken for granted, but has turned out to be an important factor in the stability of the region. This alignment probably has a high component of the ancestral confrontation between Sunnis and Shiites, but it should not be taken as permanent either. Iran will most likely return to its traditional role of financing and acting through its network of “proxy” terrorists and not getting directly involved in regional conflicts.

Iran, as expected, called the attack a failure, and conveyed the message that there would be no response, even though hours earlier Iranian Foreign Minister Hossein Amir-Abdollahian told CNN that if Israel took military measures against Iran, its response would be “immediate and at the highest level.” The market, and analysts, interpreted that there will be no escalation, at least for now, which translated into a reduction in the regional geopolitical risk premium, which in turn generated a drop in oil prices.

Ukraine

The US House of Representatives approved an aid package to Ukraine of about $61 billion. The measure had stalled in Congress and affected Ukraine's ability to contain Russian advances. Despite limited ammunition and defense equipment on the Ukrainian side, Russian forces continue to experience very high death and injury rates in Ukraine; Throughout February they reportedly experienced the highest rate since the beginning of the full-scale invasion: a total of 983 casualties per day. This, to a large extent, reflects Russia's commitment to conventional infantry and attrition warfare; The BBC speaks of more than fifty thousand Russian casualties. Ukraine rarely comments on the magnitude of its battlefield deaths. In February, President Volodymyr Zelensky said 31,000 Ukrainian troops had been killed, but estimates, based on US intelligence, suggest higher losses. No other attacks on Russian oil infrastructure have been reported this week.

Market Fundamentals

OPEC+ continues to watch the bulls from the sidelines. So far it has shown no signs of beginning to reduce its cuts; Saudi Arabia and other OPEC members in the Middle East were estimated to have well over 4 million barrels per day of idle production capacity in March, according to the US Energy Information Administration (EIA). We estimate that it is a considerably lower figure.

In the US, production continued its slow decline, confirmed in EIA reports. The Biden administration's oil policy generates few incentives for companies to invest. On the one hand, it announces the beginning of refilling the strategic reserve (SPR), today at its lowest historical level, and then changes course to remove more crude oil from the SPR to control gasoline prices this summer.

In parallel, President Biden moved Friday to limit both oil and gas drilling and mining in Alaska. State officials said the restrictions will cost jobs and make the U.S. dependent on foreign resources, but they will please environmentalists. The Interior Department finalized a regulation to block oil and gas development in 40% of Alaska's National Petroleum Reserve to, the administration says, protect the habitats of polar bears, caribou and other wildlife and the way of life of indigenous communities.

Meanwhile, the US House of Representatives overwhelmingly passed legislation aimed at countering China's purchase of Iranian crude oil, as part of a package of bills introduced in response to Iran's attack on Israel. Something that is unlikely to have much impact on the market.

On the supply side, none of the countries identified as contributing to the increase in production in the coming years shows important incremental developments in the short term, perhaps except for Brazil, which is scheduled to start up an FPSO (Floating Production, Storage and Off-loading) during this year.

So growing demand, which is approaching 103 MMbpd, is not being matched by increases in supply. It will be necessary to dip into inventories, which in turn will put upward pressure on crude oil prices, or for OPEC+ to change its strategy.

Prices

As we already mentioned, volatility was what characterized the price behavior this week. The fundamentals are consolidating a deficit oil market, constantly pressured by the changing perception of political risks coming from the Middle East.

Prices remained high at the beginning of the week, as the market digested the Iranian attack of the previous week, only to fall once international pressure seemed to have convinced Israel not to carry out a retaliatory attack. Surprised by the unexpected Israeli “attack” in the early hours of Friday, prices rose momentarily until the market internalized the temporary pause of the “give and take.”

At market close on Friday, April 19, Brent and WTI crude oil markers were trading at $87.29/bbl and $83.14/bbl respectively, down 3.5% and 4% relative to the previous week.

 

VENEZUELA

Policy

The Unlikely Agreement

This Friday the 19th, on the eve of the end of the deadline to introduce changes to electoral nominations, something happened that seemed impossible just a few hours before. In a meeting between María Corina Machado, the representatives of the PUD and the governor of the state of Zulia, Manuel Rosales, a unanimous agreement was reached regarding the nomination of a single candidate.

The Venezuelan opposition chose Mr. Edmundo González Urrutia as its candidate. The diplomat, who has the support of the main parties and the leaders María Corina Machado and Manuel Rosales, will be Maduro's main rival in the presidential elections of July 2024. González Urrutia, a career diplomat, was ambassador to Argentina and Algeria. Although little is known about him outside the opposition corridors, it emerges today as the option that would carry forward the hope for change of more than 80% of the population.

Governor Rosales aspired to be the candidate, but apparently, he could not obtain sufficient support from the rest of the parties that constitute the Unitary Platform and, fulfilling his earlier promise, he stepped aside. Some of those present revealed that González Urrutia did not have that designation in his personal plans, but he finally accepted and hence becomes Nicolás Maduro's main rival for the presidential elections on July 28. With this move, new scenarios open, but we will see what the regime has up its sleeve.

Oil Sanctions

The most anticipated news recently, displaced by political events, arrived late in the afternoon of Wednesday the 17th, when the Office of Foreign Assets Control (OFAC) announced and subsequently published The General License 44-A , replacing LG 44, which expired on April 18.

The initial reading of the new license suggests that the status of sanctions against PDVSA (which is what LG 44 deals with) was restored to the state before the promulgation of LG 44 on October 18, 2023. Further, it grants a period of 45 days so that businesses in progress under the authorizations of LG 44 can have a safe closure.

In general terms, this means that the following activities covered by LG44, among others, must be winded-down in an orderly manner:

1.     the production, extraction, sale, and export of oil or gas from Venezuela, and the supply of related goods and services

2.     the payment of invoices for goods or services related to operations in the oil or gas sector in Venezuela.

3.     the delivery of oil and gas from Venezuela to creditors of the Venezuelan government, including creditors of entities in which PDVSA owns, directly or indirectly, a 50% or more interest, for the purpose of repaying debt.

General License 41, which covers Chevron's activities from 2022, was not modified and continues.

The new scheme, according to the press release from the Department of State , allows companies that choose to continue marketing, purchase/sale activities and investments in hydrocarbon developments, to request Individual Private Licenses, which OFAC would consider. This could result in a delay in activities. As it stands in the licensing system, opaque businesses, briefcase companies and other artifices would probably not receive licenses from OFAC, and the dark export route and the anti-blockade law would be reactivated.

Economy and Oil

In the economic aspect, a slight increase in the exchange rate was recorded, exceeding Bs40/$, which puts pressure on inflation, which had a turning point at the beginning of the month. Public spending, although it remains high, shows a decline compared to previous weeks, probably due to the greater volume of foreign exchange injection required to control the exchange rate.

The regime's National Assembly approved two new oil projects. This is the formation of a new mixed company that will replace the current PetroSanFelix, corresponding to the original PetroZuata, nationalized when ConocoPhillips was expropriated. This EM will be made up of 51% PDVSA and 49% of a company called A&B Oil and Gas, a consulting and project management company. It is rumored that there is a Brazilian company behind this company, larger but without oil experience. The probabilities of a real reactivation of the project are low due to the enormous investments required to recover it.

The second approval corresponds to the expansion of the PetroQuiriquire block, in the western region, in which Repsol has a 40% shareholding. Currently, the block has the Mene Grande, Barúa and Motatán fields. The approved extension to the south incorporates the La Ceiba, Tomoporo and Ceuta fields, the latter in Lake Maracaibo. These three fields, currently operated by PDVSA, are the most prospective in the Lake Maracaibo basin. The wells are deep and expensive but have the potential to bring the field to a production exceeding 70 MBPD of medium and light crude oil. These two legislative decisions, at the request of the executive branch, represent the largest privatization of the oil industry of the revolutionary era. We imagine they will require OFAC licenses, or in any case “comfort letters”, to be able to make investment decisions.

Operations in the Hydrocarbons sector

Oil operations have not shown major shocks, the only area that was pressured was export, due to the rush to load the largest number of tankers before the end date of the LG 44 period.

The electrical problems had only minor effects on refining activities.

Production in the last 7 days averaged 773 Mbpd, very close to last week's levels, distributed across the national geography, as follows:

•          West                            152 (Chevron 58)

•          East                             146

•          Orinoco Belt                475 (Chevron 88)

•          TOTAL                          773 (Chevron 146)

Chevron is about to begin drilling its third well at PetroIndependencia, in the Orinoco Belt. The mixing operations of the Merey 16 segregation continue to have issues due to the lack of light crude oil.

The refining process managed to process 194 Mbpd with a gasoline production yield of 42 Mbpd. National production, along with gasoline imported through barter, supplied approximately 80% of what was demanded by the domestic market.

The export for the month of April is heading towards a crude export of around 650 Mbpd and 55 Mbpd of average products for the month. Until now, it is unknown whether Reliance of India will suspend its purchases of Venezuelan crude oil upon changing the sanctions regime or, on the contrary, will request a Special License to continue as a client of Venezuela. The decision will probably be linked to price conditions.

Hedge Fund Elliott Investment Management is reportedly structuring a bid to participate in the U.S. court-ordered auction of shares of Citgo Petroleum Corp's parent company. Investment bank Centerview has been hired to draft a potential bid on behalf of investors and creditors (which could include ConocoPhilips) pursuing Venezuela's foreign assets now in auction by federal court in Delaware. The auction seeks to recover claims for expropriations and debt defaults incurred by the Republic and PDVSA in the administrations of Chávez and Maduro.

BETWEEN MENACE AND HOPE

El Taladro Azul  Published  originally in Spanish in  LA GRAN ALDEA

M. Juan Szabo and Luis A. Pacheco 

The recent upward trend in oil prices, driven by geopolitical risks, was tempered by announcements from Tehran that its response to the attack on its consulate in Damascus would be limited to avoid escalation and US intervention. This news, along with rising US crude oil inventories and concerns that the Federal Reserve (FED) and the European Central Bank (ECB) could delay interest rate cuts, took the strength out of the rally. rise in oil prices, at least until the markets close on Friday the 13th.

The detente was the result of comments by Iranian Foreign Minister Hossein Amir-Abdollahian to his German counterpart that Iran is determined to respond to the Israeli attack on its consular headquarters in Damascus, but that it would do so in a “appropriate” and limited manner. On the other hand, Hezbollah, probably in coordination with Tehran, attacked Israel's northern region on Friday afternoon, launching around 50 missiles, presumably to overload Israel's defensive system.

Continuous monitoring of the region by the US indicated that preparations were in motion for the launch of a considerable number of missiles of different types. In preparation, the US moved “additional assets” to the region to bolster regional deterrence efforts and increase protection of US forces exposed to potential attack. On April 13, the observations became reality and in several batches, apparently designed to overwhelm the functional capacity of the Israeli “ Iron Dome “, 181 drones, 30 cruise missiles and 120 ballistic missiles, a total of 331 armed devices, were launched from Iran. Around 2 a.m. (Israel time) they began to approach Israel. Israel, Jordan and Egypt closed their airspace to avoid possible incidents with civil aviation.

The US and UK air forces intercepted several dozen drones before they entered Israeli airspace, and the “Iron Dome” and Israeli aviation were responsible for neutralizing the rest. As a result, and without official confirmation until now, more than 90% of the missiles and drones were intercepted, more than 170 before reaching Israel. Some  managed to penetrate the “Iron Dome” and  fell in and near the Nevatim military base , in the northeast of the country, without affecting the continuity of operation of the facilities, according to the Israeli government. 

As part of the Iranian escalation against Israel, the Revolutionary Guard captured this Saturday the MSC Aries ship, Portuguese flag and operated by the Zodiac company of Israeli magnate Eyal Oferde, while it was navigating the Strait of Hormuz in the Persian Gulf. Iran, through the official Iranian news agency IRNA, confirmed the incident. We have to remember that on Thursday the 12th the commander of the Iranian naval forces warned that he could close the Strait of Hormuz if he considered it necessary – a double-edged sword for the Iranians.

The big question now is how Israel will respond to this direct and massive attack from Iran on Israel. The war cabinet was meeting and deciding next steps, while President Biden asked Netanyahu to avoid a counterattack. The fact is that the conflict between Palestinians and Israelis has spread beyond the area surrounding Gaza, and the years-long “Cold War” between Iran and Israel appears on the verge of heating up; although there is much speculation that the attack was purely nominal and only signaled Iran's willingness to defend its interests. In fact, Iran's Foreign Minister Hossein Amir Abdollahian stated that he had notified neighboring countries, including the United States' main allies, 72 hours in advance.

At the time of closing this column, market activities were beginning in Asia: oil prices reacted very moderately, although without a doubt the actors are watching the events with understandable anxiety.

Regarding the world economy, we find a mix of news, negative and encouraging, that induces central banks to rethink their plans to reduce interest rates. Thus, we see a rebound in inflation in some regions, signs of an increase in manufacturing activity in Germany, and an increase in job creation in the US. While in China, the economy is not reacting to government stimuli as expected , and India is taking over from China in terms of its growth rate.

In the US, the consumer price index rose 0.4% monthly in March, and 3.5% annually. Federal Reserve officials expressed concern that inflation was not falling fast enough, as FOMC (Federal Open Market Committee) meeting notes from the March meeting revealed. However, monetary authorities are confident they can cut interest rates at some point this year. Europe kept interest rates unchanged, but opened the door to a first reduction in June this year.

In the hydrocarbon sector, the US crude oil production, published by the EIA , continued at a plateau of around 13.0 MMbpd, although that figure tends to be revised over time, depending on adjustment factors applied by that agency. Our calculations point to production of 12.9 MMbpd, which is still the highest production of all countries. The relative stagnation is closely linked to the relative low level of drilling activity, which has been falling since the end of 2022. This week was no exception, the Baker Hughes weekly report shows a reduction of 3 units over the last week.

That same report, which shows the movements of active drills in the rest of the world, on a monthly basis, indicates that about 15 units were incorporated during March. These increases correspond to Saudi Arabia, Nigeria, Algeria, Brazil and Indonesia; and five additional in Canada.

For its part, OPEC maintained its bullish outlook on global oil demand, while cutting its supply forecasts for 2024, which would push the market further into deficit for the next quarter. The cartel forecasts oil demand growth of 2.25 million bpd by 2024 and 1.85 million bpd in 2025. 

Almost in response to OPEC's position, the International Energy Agency (IEA) on Friday cut its 2024 oil demand forecast by 130 MBPD, followed by another slowdown next year and a return to baseline "normalization." . The agency now forecasts oil demand growth in 2024 of 1.2 MMbpd, slowing for the second consecutive year to 1.1 MMbpd in 2025.

So, as a reflection of these economic and geopolitical news, prices fluctuated during the week within a narrow band, depending on the order in which the news was known: for Brent crude, between $90/bbl and $91/BBL. At the close of the markets, on Friday, April 12, the Brent and WTI crude markers were trading at $90.45/bbl and $85.66/bbl respectively.

In other news.

• Natural gas in the US will be cheaper to burn than coal in 2024 for the first time in history, EIA said on Tuesday in its Short-Term Energy Outlook (STEO). It must be remembered that the very low gas prices in the US are related to the limitations imposed by the government on the export of liquefied gas and obviously to a surplus supply. In some regions, associated gas producers have paid customers to receive gas deliveries so as not to have their production operations affected.
• Brazil's state oil company Petrobras said on Tuesday it had discovered oil deposits in the ultra-deep waters of the Potiguar basin. This is the second well in Potiguar where the oil company finds hydrocarbons. Both findings are still subject to further study, Petrobras said. Potiguar is located on the so-called Equatorial Margin, a large area in northern Brazil that is considered the most promising frontier for Petrobras' oil and gas exploration. The discovery is located in waters with a water depth of more than 2,000 meters and could be related to the Guyana/Suriname basin from a geological point of view.

VENEZUELA

The US still seeks efficient pragmatism

Just two days before what we call “L Day”, April 18, that is, the expiration of the validity of OFAC License #44, uncertainty increases regarding the actions of the White House authorities. Indeed, when everything indicated that the United States would be forced to enforce its warning to suspend the license due to the regime's repeated lack of knowledge of the Barbados agreement, it was learned that the negotiators of Venezuela and the United States maintained “secret” meetings in Mexico; Jorge Rodríguez for the regime and a delegation from the White House headed by Daniel Erikson.

Each side gave an interpretation to the meeting according to their particular interests. The US representative indicated that the purpose was “to express our concerns about the electoral process in Venezuela,” while those close to the regime have said that it was demonstrated to the Americans “that the electoral process complied with the Barbados agreements.” . The regime alleged that a number of candidates identified with the opposition were registered to participate in the race, which according to them shows that the process is competitive; obviously without emphasizing that the PUD, which probably gathers 70% of the electorate behind María Corina Machado or Corina Yoris, has not been allowed to participate, simply blocking their access to the CNE. During the weekend it became known that there were negotiations in the opposition to find a solution that would effectively unify them.

In a maneuver with obvious electoral connotations, and under an avalanche of international accusations, the regime announced the arrest of former minister Tareck El Aissami and his closest figureheads. They are accused, among other things, of treason and money laundering. Everything looks like an attempt to whitewash a regime in which, of the last 5 presidents of PDVSA and Ministers of Hydrocarbons, one is on the run in Italy, two are in prison, one died while in prison and another was dismissed. Added to this is the conviction of General(r) Clíver Alcalá, the soldier closest to Chávez, and the trial of General(r) Hugo “pollo” Carvajal; In Europe, a number of assets were frozen belonging to high-level officials of the regime accused of money laundering and drug trafficking.

Another international scandal that could have repercussions on the image of the regime are the statements of the Chilean prosecutor, Héctor Barrios, who assured that the kidnapping and murder of Venezuelan lieutenant Ronald Ojeda was a crime with political motives and that it was requested from Venezuela.

As expected, public spending has increased, in part to expand the CLAP program. On the other hand, the injection of foreign currency into the exchange market was used to avoid the devaluation of the Bolívar and try to control inflation. To a large extent, this achievement is related to foreign exchange from Chevron's operations and more recently to better prices for hydrocarbon exports.

Hydrocarbon Sector 

One element has gone under the table, since it has not been mentioned by the media or by related companies, is the dredging of the Maracaibo Lake canal,  evidenced by the passage of tankers with greater draft in that important maritime route.

This week the electrical problems continued but without affecting oil activities. While Baker Hughes reported that drilling rigs in operations increased to 3 units, a figure seen for the first time since April 2020.

Crude oil production averaged 777 Mbpd during the last 7 days, the same as the previous week, distributed throughout the national geography, as follows:

• West              151 (Chevron 58)

• East              147

• Orinoco Belt              479 (Chevron 87)

• TOTAL 777 (Chevron 145)

Refining returned to pre-accident processing levels and averaged 186 Mbpd, with a gasoline yield of 49 Mbpd. So the internal market continues to depend on imports through barter.

Exports during the first 12 days of the month have been conducted as scheduled, but it is difficult to predict so early in the month, especially with the risk of reactivation of sanctions that would affect purchases from India and potentially other customers. One element to note is that there have been no crude oil exports to Cuba, presumably to increase revenue from crude oil sales.

In the continuing saga of the PDVSA 2020 bonds, the Southern District of New York court in VR Global Partners LP v. Petróleos de Venezuela SA Ad Hoc, No. 23-cv-05604, granted PDVSA Ad Hoc's motion to dismiss the claims filed by VR Global Partners, LP, regarding the bonds. This decision eliminates, for now, an additional complication to the general case of the invalidity of the PDVSA 2020 operation, which continues its legal process in another court in the same jurisdiction, while reaffirming that the actions of PDVSA Ad Hoc in defense of Venezuela's interests have been conducted with total transparency and legality.