THE DECLINE STOPS, BUT THE RECOVERY IS WEAK

El Taladro Azul  Published  Originally in Spanish in  LA GRAN ALDEA

M. Juan Szabo and Luis A. Pacheco 

THE DECLINE STOPS, BUT THE RECOVERY IS WEAK

 

The anticipated decision of the U.S. Federal Reserve (FED) on monetary policy, plus the shrinking of oil inventories in the U.S., the increase in geopolitical risk, and the persistent limitations in the global crude supply impacted oil prices. The market, faced with these signals, seems to be reorienting its focus, no longer on its concerns about future demand but on what may happen with supply.

 

We believe the news that the FED has initiated monetary easing will have a greater eventual response than that shown this week. With a weaker dollar and better macroeconomic prospects, there could be additional positive reactions over the coming weeks.

 

Fundamentals

 

The week was dominated by news from the Federal Open Market Committee (FOMC) meeting, which gathered to review economic conditions and consider monetary policy decisions. In particular, the Federal Reserve announced a reduction in the reference rate by half a percentage point or 50 basis points. While the cut was highly anticipated, its size surprised many economists and rate observers. The initial reaction of the oil market was moderate, although it alleviated concerns of a sharp economic landing. However, as we mentioned above, the response is expected to intensify as the decision percolates into market perception. However, it's difficult to gauge going forward since the rate cut, though not its dimension, was already factored in by the market.

 

Commercial crude oil inventories in the U.S. fell to their lowest level in a year—excluding the strategic petroleum reserve. According to the Energy Information Administration (EIA), in the week ending September 13, crude inventories fell by 1.6 million barrels to a level of 417.5 million barrels, compared to analysts' expectations of a 500,000-barrel reduction. In Cushing, Oklahoma, stored crude fell by 2 million barrels. At this WTI crude storage and transaction center, inventories have reached 22.7 million barrels, the lowest level in a year and close to their minimum operational levels, resulting from 10 negative reports over the last 11 weeks. The typical Wednesday crude inventory report caused a second positive impact on the global oil market's perception of prices.

 

Supply disruptions in the Gulf of Mexico, resulting from preventive measures ahead of Hurricane Francine's arrival, still impact offshore oil and gas production in Louisiana, although nothing remains of its wake. U.S. crude production shows a reduction of around 100,000 barrels per day (bpd) compared to pre-Hurricane Francine levels. Drilling activity, strongly associated with generating additional production, maintains a declining trend; this week, two units were taken out of service, according to the Baker Hughes report.

 

The other major interruption in crude supply to the market corresponds to the closure of fields in Libya, which are still affected by the internal dispute over managing oil revenues, in an attitude of “Dog in the Manger” in the two factions.

 

While Western economies have been fighting inflation for the past two years, China seems to be experiencing the opposite. Deflationary pressure is building up in the country. This represents a potential danger for economic prospects, as it would tend to reduce wages and salaries, which could trigger a domino effect of decreased spending, lower corporate income, and subsequent layoffs. It's not what the Chinese economy needs to get back on the path of growth, and it would translate into lower oil demand, at least until well into 2025. Some banks estimate that the Chinese government has been very timid in using fiscal stimulus tools.

 

Geopolitics

 

The geopolitical risk associated with oil supply increasingly depends on more situations in full development. To the declared wars between Russia and Ukraine and the conflict between Israel and Hamas and its regional repercussions, whose outcomes have become changeable. The economic competition between the U.S. and China and the associated tensions in the South China Sea, through which a third of world trade passes. Moreover, the uncertainty that emerges from the U.S. political process as the presidential elections approach is a new factor to discern.

 

In the war between Ukraine and Russia, the fundamental change has been Ukraine's success in bombing, mainly through drones, targets in Russia related to fuel depots, arsenals, and energy infrastructure. It is estimated that these attacks may force Russia to reduce its crude production below millions of barrels per day. Although Ukrainian military activity doesn't have much to do with Russian oil production, it has indirectly forced the redistribution of investments, resulting in less investment available for generating production potential.

 

Meanwhile, in the Middle East, military operations are shifting towards northern Israel, specifically against the terrorist group Hezbollah, entrenched in southern Lebanon and constantly launching missiles against targets in Israel. Having neutralized a good part of Hamas terrorists in the Gaza Strip, Israel seems to have decided that it has to confront Hezbollah using a novel war strategy.

 

This week, in an agile and unexpected operation believed to have been carried out by the Israeli intelligence service, the pagers that Hezbollah members used exclusively and which had been intervened somewhere along the supply line detonated simultaneously.

 

The simple yet sophisticated operation sought to identify and take down Hezbollah members embedded in the civilian population while minimizing impacts on non-combatants. The next day, the procedure was repeated, this time on the walkie-talkies also used by Hezbollah terrorists. Subsequently, the Israelis carried out a preventive air strike in Lebanese territory, in which about 1,000 missiles and their launch equipment were destroyed as they were being prepared for launch. Hezbollah responded with a massive attack of about 180 missiles directed at northern Israel.

 

Additionally, in an attack on a building, a stronghold of the extremist group, in a southern suburb of the Lebanese capital, at least 14 people died in the “selective” attack. This included Hezbollah's senior military commander, Ibrahim Aqil, and other members of Hezbollah's military command. The Hezbollah militia (with Iran's support) has vowed to avenge the wave of Israeli attacks this week in Lebanon.

 

The corollary of this recent saga is that the probability of a large-scale confrontation could be on the agenda, which would have an exponential effect on the geopolitical risk of the area. This risk that is probably underpinning crude prices or at least has the markets very nervous.

 

Other Energy News

 

·      Exploration and resource development in the Atlantic Basin is now more alive than ever, following the enormous developments off the coast of Guyana led by ExxonMobil and TotalEnergies' plans to exploit the resources discovered in Guyana's neighbor, Suriname. TotalEnergies, which partners with APA Corp off the coast of Suriname, has already made several discoveries in the area. Companies are expected to make the final investment decision (FID) to develop part of the resources as early as next month, according to Bloomberg sources.

 

·      The sale of battery electric vehicles (BEVs) in the European Union fell by 44% in August compared to the previous year. The European Automobile Manufacturers Association, ACEA, called for government measures to reverse the trend. The total market share of battery electric vehicles fell to 14.4% from 21% the previous year. In August 2024, gasoline car sales fell by 17.1%, and the four key markets recorded significant drops: France (-36.6%), Italy (-18.8%), Spain (-17.4%), and Germany (-7.4%). Gasoline cars now represent 33.1% of the market, compared to 32.6% in August of the previous year.

 

·      The Colombian Government suspended peace talks with the leftist guerrilla group National Liberation Army (ELN) following an attack that killed two government soldiers and injured more than two dozen. The decision is another blow to President Petro's “total peace” policy, which sought to eliminate the ELN from its role in the South American country's six decades of internal armed conflict. The measure could increase attacks on oil facilities, which are already concerning.

 

·      War risk insurance premiums paid by ships when navigating the Red Sea were estimated at up to 2% of the ship's value, almost triple the 0.7% quoted in early September. The increase took effect after the attack on the tanker Sounion on August 21 and the resulting saga of the tanker on fire adrift at sea.

 

·      Uncertainty continues over the delivery of Azerbaijani gas to Europe after the gas transit agreement with Russia ends. Sources from both sides confirmed that there were no negotiations on the matter.

 

Price Behavior

 

Midweek, the oil market received a boost with the Fed's decision and the publication of U.S. crude inventories by the EIA. Tensions in the Middle East and Eastern Europe, which increase geopolitical risks, should also lead to a further rise in prices. However, the price increase has been limited by well-founded concerns surrounding oil demand prospects in China.

 

At the close of markets on Friday, September 20, the benchmark crude Brent and WTI were trading at $74.5/bbl and $71.0/bbl, respectively, an increase of around 4% compared to the previous week.

 

VENEZUELA: Still An Oil Country?

 

Venezuela's political situation is not only particular but probably unique. Unlike other oil-producing countries, where the industry is carefully nurtured because it is the main base on which the economy rises, the regime has ignored, destroyed, embezzled, and squandered the great opportunities that oil has provided over the past 25 years.

 

Oil has been the architect or cause of many political changes. It bolstered Gómez's dictatorship but also contributed to the birth of democracy and the country's modernization, to mention an example. It's not difficult to argue that the dramatic fall in oil prices at the end of the 20th century, coupled with the political and economic crisis of democracy, contributed to Chavismo's electoral victory in 1998. A political change that was sold as necessary and hopeful but which ultimately was a leap into the void.

 

Although Venezuela's oil industry is in ruins today, it still provides the necessary resources for the regime to survive in a diminished economy and amid a humanitarian crisis. Unlike other countries under sanctions, such as Iran and Russia, the Maduro regime, in a sum of incompetence and negligence, has let the oil industry languish, using sanctions as a convenient excuse.

 

It is in this context that one must analyze the sanctions. Given the ineffectiveness of the regime's oil management, the only incremental oil revenues depend on the goodwill of licenses granted to a small group of private companies. It should be said that the main interest of these companies is not to recover the industry but to recover part of what PDVSA owes them, incidentally, the only debt being paid. The consideration for these licenses was the regime's promise to facilitate the recovery of democracy.

 

Democratic countries insist on pressing for political transition and for the new legitimately elected government to take office on January 10, 2025. Among the pressure mechanisms at hand is the continuity or not of oil sanctions. Now, there is debate in the U.S. about whether these licenses, granted in exchange for deceptions, should be withdrawn to incentivize the regime towards a peaceful political transition.

 

The week was plagued with unexpected but not surprising events. The president of the 2020 National Assembly, Jorge Rodriguez, revealed that Edmundo González Urrutia (EGU), before receiving safe conduct and leaving for asylum, signed a letter accepting the decision emanating from the Electoral Chamber of the TSJ. He committed not to engage in political activity once he arrived in Spain. He also showed videos/photos of a meeting held at the Spanish Embassy in Caracas, where the President-Elect is seen, accompanied by Vice President Delcy Rodríguez, her brother Jorge, and a Spanish embassy official.

 

Edmundo González Urrutia recounted that, indeed, Maduro's representatives, Delcy and Jorge Rodriguez, presented themselves at the embassy and conditioned his departure on signing the text. After long negotiations and under coercion, he signed, understanding that documents signed under threat and coercion have no validity before the law.

 

Undoubtedly, it's a diplomatically complex situation. That this event occurred at the Spanish Embassy, in the presence of the Ambassador, where unauthorized videos and recordings were taken. Meanwhile, a Spanish air force plane waited in the Dominican Republic for three days for the results of the negotiation, to then transfer the exile to Spain.

 

In any case, since he arrived in Madrid, EGU has dedicated himself to contacting high-ranking Spanish political figures. He has also sent a message to the European Parliament, which has since recognized him as president-elect, as did the Spanish Congress of Deputies and Senate. However, the Sánchez Government has not accepted this recommendation. The same happened in Colombia, where the House of Representatives approved a proposition to recognize EGU as the president-elect of Venezuela.

 

In a repetition of an already much-used tactic, the regime captured Spanish citizens, a Czech, and four Americans, accusing them, without presenting evidence, of being “terrorists” and undercover agents in an assassination plot promoted by the Venezuelan opposition. It's not the first time the regime has dedicated itself to arresting foreign citizens who are subsequently used in negotiations. To add to the farce, Attorney General Tarek William Saab requested an arrest warrant against Argentine President Javier Milei.

 

The regime continues to cling to its economic policy of high public spending and anchoring the official dollar, which is becoming increasingly costly and difficult to maintain. The logical result of this policy is the scarcity of foreign currency for imports, which is widening the gap between the official and parallel exchange rates, currently close to 20%, and which is pushing inflation.

 

Oil Operations

 

During the last week, without many events to report, crude production remained constant. Refining has not been able to recover, and exports continue with their problems of diluent limitations for the Merey grade blend.

 

Crude production averaged 837 thousand barrels per day (Mbpd), unchanged from the previous week. The geographical distribution of production was as follows:

 

- West:                                    193 (Chevron 89)

- East:                                     140

- Orinoco Belt:                        504 (Chevron 105)

- TOTAL:                                836 (Chevron 194)

 

The Amuay and Cardón refineries have not been able to start up since the shutdown on September 12 due to alleged failures in power generation. As of Thursday, two distillation towers were put into operation, but a series of operational issues in other process plants have not been resolved, so that the national average processing barely exceeds 150 Mbpd. These failures affect the supply of fuels for the local market, which for now depends on meager production from national refineries and volumes received from swaps with Repsol and inventory that must be running out.

 

Exports to the U.S., through Chevron, are averaging 242 Mbpd. To Spain, through Repsol, 78 Mbpd have been sent. Exports to the Far East, with their specification problems, are averaging 366 Mbpd and to Cuba 35 Mbpd.

IBSEN MARTÍNEZ: THE WRITER WHO WANTED TO BE AN OIL MAN

 Published  Originally in Spanish in  LA GRAN ALDEA

Luis A. Pacheco

 

The sharp and intelligent voice of Ibsen Martínez fell silent last night, September 11, in the city of his affections, Caracas. After years of painful and anguishing exile in Bogotá, he returned to the capital city to straighten out his health and embark on a journey to Spain, where his son waited. It was not to be.

 

This is not the place, nor am I the right person to write about Ibsen's contribution to Venezuelan letters, both as a journalist and playwright and his pending task of writing The Novel about the oil adventure. His last novel “Oil Story” was a great attempt, but I believe he considered it a necessary compromise to publish. I trust that history will recognize his contribution.

 

It can be said that Ibsen was what the ancients called a polymath. He had studied mathematics at UCV, a career he abandoned to write. He wrote about economics, after having studied it. Not only that, but he dissected politics with a clinical eye and recounted Venezuelan history like few others. He wanted to write a script about the American writer Hemingway, and he read all of his work. An unrepentant music lover, he could discourse on Mahler, Fania All-Stars, or the Rolling Stones with equal gusto. His knowledge of baseball was encyclopedic, although I very much doubt, he could hit a well-pitched ball. He was a bookworm and used the libraries in Bogotá with passion.

 

I met Ibsen through my brother, Emilio, who was his friend and eventually, his editor for the columns he wrote in English for an American publication. I only knew then that he had been the scriptwriter for the political soap opera "Por estas Calles" in the 90s.

 

I met him again in Bogotá, where we had both ended up after having to leave Venezuela. I got to know him better, with his lights and shadows. The life of an exile was not easy for him; it never is. I wonder if he had any novel in the works to exorcise these hard years with his pen.

 

Ibsen, when he lit up, was the best conversation one could have, polite, intelligent, incisive, very entertaining; there was no topic where he didn't have something interesting to say. When he darkened, he was merciless with his adversary, intolerant, quarrelsome. His personal and family life was tinged with that darkness. It reminds me of the phrase with which Tolstoy begins his Anna Karenina: “All happy families are alike; each unhappy family is unhappy in its own way.”

 

In his later years, his past came to haunt him, and he was accused of gender violence, and the sentence of the social media court was lapidary. I think there's nothing to add to what Milagros Socorro wrote regarding his death:

 

"Is it true that Ibsen Martínez beat women and that he often set himself up as a judge of others? A great truth. The first, he acknowledged in the interview in El País, December 2023, and the second, he conceded in an interview in October 2023, regarding his novel “Oil Story,” where he said: “Now I take others' positions with more compassion, they no longer move me to satire…” But it is also true that he took the Spanish of Venezuela to very high levels and that he maintained a brave civic conduct, which, by the way, earned him exile…”

 

Ibsen, the son of an oil worker in eastern Venezuela and a teacher, understood like few others the role of oil in the development of contemporary Venezuela. However, he always had a complicated relationship with oil and post-nationalization oil workers. What motivated that ambiguity towards our main industry? His relationship with his father? Perhaps his adventures in leftist politics? It's something I never fully understood, nor wanted to ask him, but that tension is reflected in much of his written work: “La Hora Texaco”, “Petroleros Suicidas”, Oil Story, and many of his essays.

 

Few Venezuelans have heard of the oil pioneer Ralph Arnold, and even fewer have read his book with the interest that Ibsen did — in fact, that book and Arnold's figure are a central part of his novel Oil Story. Once, in a radio conversation he had with the author Leonardo Padrón, he said he would have liked to live in Venezuela from 1910 to 1920, as one of Arnold's geologists.

 

His play "Petroleros Suicidas" (2011), which was staged in Caracas, was very successful with the public. However, the title of the play and Ibsen's scandalous statements to promote it caused an uproar among former PDVSA workers. They considered it offensive and embarked on a campaign of angry complaints to the author, which, as we can imagine, Ibsen responded to with virulence.

 

As I couldn't go to Caracas to see the play, and I was curious about the scandal surrounding it, I asked Ibsen to give me a copy of the script to read. Generously, he sent me a digital copy with the promise that I wouldn't circulate it or reveal its provenance.

 

The text I attach here is something I wrote after having read the script, and which I circulated only among my acquaintances as fiction. I had not seen the play, although I had seen and read Ibsen's interviews about it. I publish it here as a tribute to Ibsen, and because I believe the text reflects not only of Ibsen's personality and his obsession with oil. It is also written from my respect for him, despite his undisguised animosity towards us oil workers. I shared the text with him at the time, but he never told me if he had read it, perhaps it was better that way.

 

 

Ibsen, the Suicides, Cabrujas and Meneses

Luis A. Pacheco, Bogotá, 2011

 

“The play was a great success, but the audience was a disaster.” Oscar Wilde.

 

SCENE 1. Somewhere in Bogotá, on any night, raining, of course, a laptop, a black seal on the rocks - Carlos Vives playing on the radio.

 

When one lives outside their homeland, whether by choice or obligation, one of the most difficult things to maintain is a realistic contact with the life that unfolds in the land we left behind. Even in this era of Twitter, BBM, SMS, and YouTube, there is no adequate substitute for the context given by the colors, sounds, and above all, the smells of being on-site, being an actor on the stage of events.

 

All this comes to mind due to the uproar that has arisen around the staging of the play "Petroleros Suicidas" (Suicidal Oil Workers) by Ibsen Martinez, and the impossibility, at least in the short term, of satisfying my curiosity.  I wanted to contrast the noise generated in social media with reality. The title of the play alone, of questionable taste but undoubtedly memorable, has generated more controversy than any other work by Ibsen, except for the character of the “Man with the Label” from his well known soap opera "Por Estas Calles." Undoubtedly evoking the same scabrousness.

 

It is not my intention to either mediate or take sides in what has become a public exchange of insults between Ibsen Martínez and his detractors (mostly ex-workers from the former PDVSA, my colleagues, and friends). It's a duel of venomous darts that, although they don't kill, contribute to reinforcing old prejudices and creating new resentments, which is the last thing we need to build a new and better country. Besides, if one wants to engage in verbal fencing, Ibsen is the last of the adversaries I would choose. The probability of coming out badly wounded is too high.

 

The subject of disagreement, in addition to the title of the work, is the criticism that Ibsen Martínez has made in various media about the so-called “Oil Strike”.  It is assumed that the play in question is meant to criticize the oil workers who took part in those events of 2002 and 2003. A presumption that Ibsen Martínez, ambiguously (skillfully?), does not try to deny. His most common response to the attacks, and the least belligerent, is cryptic: “See the play.”

 

SCENE 2. At a bar in Altamira, Caracas, a memory stick with the draft of the script is forgotten on the bar counter, a figure in the shadows takes it, and “Wikileaks” it — salsa music is heard in the background.

 

I opened the file with great expectation. Imagine the reader's disappointment when I start reading the script and realize that the play is not at all about the “General Strike” of 2002-2003; that will have to wait for another play or another author. I felt deceived and disillusioned. I was ready to fight on behalf of my professional class. The play, which takes place in different timelines, uses the circumstances of the strike to establish a backdrop for the characters. At the outset, it allows the author to announce, through one of the characters, his critical position about the “Strike” and oil workers in general.

 

But that moment passes quickly, and without much meandering, the text takes us, along with the protagonist couple and the other two characters, into the dark alleys of Venezuela and its psychological relationship with oil. There are other characters, but they are invisible and mute, only alluded to as if they were an absent relative.

 

Martínez unloads on the audience all the dramatic and melodramatic arsenal acquired in his long career as a writer: failed loves, homicides, adulteries, corruption, cowardice, all this within the framework of the state oil company, but without alluding to the latter with great interest, yet with excessive harshness.

 

The play "Petroleros Suicidas" is about many things. For me, it's about the only female character: Natalia. Natalia represents Venezuela: feminine, brave, in an eternal search for a love that she never quite finds. Natalia is the voice that Martínez uses, perhaps unconsciously, to represent “Gente del Petróleo”: idealistic, disenchanted with the result of their actions, yet convinced that at every moment they have done the right thing. Natalia reminds us that oil has also made us aspire and conquer, regardless of what wise analysts, or authors think, yesterday or today. This is despite the recognizable darkness of the other characters that Martínez puts on stage, whom I recognize but choose to ignore.

 

SCENE 3 — Television Studio. Props that look taken from a second-hand furniture store.  The host, a journalist with luminous eyes, presents the fashionable author with a long and convoluted monologue. The writer sits on a sofa. He looks uncomfortable and forces a smile.

 

Martínez, now more relaxed, tells María Elena Lavaud anecdotes about his beginnings as a scriptwriter working alongside the great José Ignacio Cabrujas. His favorite anecdote is one in which Cabrujas tricks the executives of the TV channel where they work. He convinces them to make a script based on the novel “Campeones” by Guillermo Meneses, a novel that neither Martinez nor Cabrujas have ever read. It was fashionable to make soap operas based on Venezuelan works.

 

Cabrujas ends up discarding the novel and only preserves the title and main characters, writing along with Martínez a whole new narrative, without the poorly read television executives realizing the deception. Martínez ends the story with a voice of admiration, calling Cabrujas the “true trickster” (verdadero malandro).

 

Years later, Martínez has become a true trickster himself. The title "Petroleros Suicidas," the allusion to the general strike, and the PDVSA characters are, like the Meneses' novel, just a provocative screen. The story Martínez tells in the play is about us Venezuelans and the effect that oil has come to have on our psyche and social values. Martínez seems to subscribe to Juan Pablo Pérez Alfonso's “black legend” and his vision of oil as the devil's excrement” (oil as a perverse influence).

 

Call me naïve about the play, but ultimately, there's the character of Natalia, in whom Ibsen Martínez still finds reasons to move forward. Is it just a coincidence that “Natalia de 8 a 9,” a groundbreaking soap opera by his admired Cabrujas, also represents rebirth after destruction?

 

The light dims softly. There's no Yordano song, but there should be...

A MARKET TRAPPED IN UNCERTAINTY

El Taladro Azul  Published  Originally in Spanish in  LA GRAN ALDEA

M. Juan Szabo and Luis A. Pacheco 

 

Trying to understand the movement of oil prices is, at best, a thankless task. Just as one arrives at a reasonable explanation of the situation, a change in conditions, even if insignificant, causes the market to abandon the sentiment it considered logical only days before and take a new direction, if only temporarily.

 

The downward price trend of recent weeks, predicated on an oversupply versus a demand presumed to be in recession, was not as robust as thought. It was enough for some circumstantial situations with supply to emerge for the market to migrate to a moment of euphoria.

 

Hurricane Francine, a tropical storm of moderate intensity, caused the preventive closure of offshore oil and gas production platforms off the coast of Louisiana, USA. In Libya, part of its production remains closed due to unresolved differences between factions vying for control of oil revenue, despite UN mediation. As has happened recently, exaggerated overreaction is how the market reflects new information, which, in the end, is the nature of the oil business – some would say it's how business is done in a speculative market.

 

Some reactions turn out to be paradoxical. At the recent Asia Pacific Petroleum Conference (APPEC), held in Singapore, in an atmosphere of generalized pessimism, Goldman Sachs stated that prices could fall even further, even to $60/BBL. Let's remember that this was the same investment bank that was forecasting prices reaching $100/BBL before the end of the year. We find it difficult to identify the changes that justify such a change of opinion, which is also evident at the slightest supply stumble. But as we just mentioned, that is the nature of the oil market.

 

However, now that China's pessimism is reaching its apparent point of maximum concern, it would take more than supply interruptions to raise Brent above its current price of $72/BBL. That “something more,” in our opinion, is, in the first instance, an increase in supply, both from OPEP+ and producers outside the OPEC sphere, lower than the varied forecasts of the different agencies IEA, EIA, and OPEC.

 

Fundamentals

 

Concerns about the safety of oil facilities in the Gulf of Mexico, particularly off the coast of Louisiana, led operators to evacuate offshore platforms, reducing oil and gas production, and refineries in the area minimized their runs.

 

As a result, seven hundred thousand barrels per day of oil and gas equivalent (700,000 boed) were shut down, about half of that volume corresponding to oil, albeit only for a few days. Likewise, refineries located in the projected path of the hurricane reduced their run to operational minimums but are already returning to normal. Phillips66 (NYSE: PSX) and CITGO, in Lake Charles, Louisiana, reported no damage.

 

U.S. crude production for the week reflects this preventive shutdown; the weekly average barely shows 12.9 million barrels per day (MMbpd). The decreasing trend in rig activity, which had become a constant, changed course this week. According to Baker Hughes, eight rigs were activated, mostly in natural gas areas or in conventional crude development. This week, commercial crude inventories, according to the Energy Information Administration (EIA) report, showed an increase of 800,000 barrels, an insignificant figure when compared to the estimated increase by analysts of 2.0 million barrels; individual weekly numbers are most relevant when viewed as part of the trend. Gasoline inventories increased by 2.3 million barrels, in line with seasonality.

 

Regarding OPEC+ production, recent figures indicate a reduction of about 500,000 barrels per day (Mbpd) compared to July; it includes cuts of 300 Mbpd in Libya, 100 Mbpd in Iraq, 50 Mbpd in Saudi Arabia, and 30 Mbpd in Russia. In Libya's case, although the production shutdown is larger, the accounting of OPEC's secondary sources uses reported shipments as a calculation basis, which includes inventory use. OPEC+'s decision to postpone openings of shut-in production until the end of the year further reduces the crude supplied to the market. In any case, as we have mentioned on several occasions, the idle capacity maintained in OPEC+ accounting may have been eroded by the decline inherent in using that capacity instead of investing in new capacity.

 

On the demand side, China dominates the landscape. The country is going through an economic slowdown that seems to be prolonged, affecting Chinese oil demand, and to enhance the effect, it coincides with the ongoing decarbonization of its transport fleet. Paradoxically, the Chinese government uses these periods of relatively low prices to bolster its strategic reserves, adding some dynamism to its demand: China's crude oil imports increased to a one-year high of 11.56 million bpd in August, recovering from a two-year low in July.

 

The country's petrochemical sector, an important area for oil demand as it is not subject to short and medium-term replacements, could be threatened if growing trade tensions with the West impact exports.

 

In sum, it is a market where the fundamental forces of the industry compete in a market with light feet and short-term vision.

 

Geopolitics

 

The development of the Israel vs. Hamas war resembles a chess game without a clock. Predicting events and their chronology is practically impossible. Perhaps that's why the contest sometimes looks stagnant and without collateral effects on the rest of the region, with the critical exception of continuous human casualties. This week, there wasn't even new activity from the Houthis of Yemen in the Red Sea, although surprisingly, the rebels launched a new technology missile into Israeli territory, which seems to have circumvented the country's sophisticated air defense.

 

Meanwhile, the Ukraine-Russia war involves increasingly more territory and more countries and tends to affect the energy market marginally due to the destruction of oil and electrical infrastructure in both countries.

 

Thus, the geopolitical risk premium that the market would normally assign to oil prices when there are conflicts with the probability of an escalation that interrupts oil activities is almost non-existent for now. One must presume that the market factors in OPEC+'s idle production capacity and weak demand are protection against the eventuality of supply problems, a risky bet.

 

Price Behavior

 

The price of Brent Crude has lost around 13% of its value in the last 20 days due to a mix of realities and feedback between the market's pessimistic sentiment and the application of the popular Murphy's Law as an interpretative mechanism for each new piece of news that afflicts crude demand, particularly China's economic situation: “If something can go wrong, it will go wrong.”

 

Last Tuesday, oil prices continued their downward dynamic, falling to reach the lowest levels of the year. However, the interpretation that supply interruptions could wreak havoc on the short-term physical market made prices begin to react gradually. On Friday, crude oil futures took one step forward and one step back, although production losses in Libya and the Gulf of Mexico helped consolidate a modest weekly gain, breaking the trend of previous weeks.

 

At the close of markets on Friday, September 13, the benchmark Brent and WTI crudes were trading at $71.61/bbl and $68.65/bbl respectively. A meager gain of around 1% in the week.

 

Venezuela

Between Surprise and Suspicion

 

Ambassador Edmundo González Urrutia (EGU), the president-elect in the elections of July 28, after days of guarded whereabouts, surprised the country's public opinion with his departure from Venezuela aboard a Spanish air force plane; he was bound for Madrid, where the government had granted him the benefits of political asylum.

 

As magical realism continues to be part of our idiosyncrasy, all kinds of stories and myths surround the unexpected development of events. While the regime announced that the departure had been the product of a negotiation, the Spanish foreign ministry denied that anything had been negotiated beyond the contacts to request and grant asylum, according to the law. It was also known that EGU had been a guest at the embassy of the Netherlands for several weeks, a euphemism that allowed the outgoing ambassador of that European country not to communicate his presence to the Venezuelan foreign ministry.

 

There was also doubt whether EGU's decision was known to María Corina Machado (MCM) or, on the contrary, like the majority, she was also surprised by the departure. But the main concern in the opposition ranks was the doubt about what the president-elect's intentions would be once he was residing in Spain. These doubts arose from a confusing initial statement from EGU. The democratic opposition in Venezuela spread the narrative that the situation was convenient, as González Urrutia's life was in danger in Venezuela, and from exile, he could defend his victory more precisely in the centers of power.

 

In Spain, his cause has had much resonance, even though the Sánchez Government recognizes neither Maduro nor González Urrutia as president-elect, insisting that the CNE has to present the official voting records. An argument that, weeks after the fraud, is Pyrrhic since the period for presenting the official results has expired and, on the other hand, the regime resorted to a legal farce to circumvent the legal obligations in this regard.

 

The Popular Party (PP) and VOX, knowing that some of the Spanish Government's allies would not accompany Pedro Sánchez in his stance of not recognizing EGU as president-elect, submitted and achieved majority approval in the Spanish Congress of Deputies. This exhortation to the Spanish government calls for the recognition of EGU as president-elect of Venezuela. A similar action is being programmed in the Senate, more a chapter in Spain's internal political tug-of-war than effective support for EGU.

 

In what seems to clarify González Urrutia's plans a bit, he met with President Sánchez at the Moncloa (official presidential residence), and the next day with former presidents Felipe González and Mariano Rajoy, although it was later announced that his political actions in Spain would be limited until his situation is formalized.

 

On the other hand, U.S. Secretary of State Antony Blinken has recognized opposition candidate Edmundo González Urrutia as the winner of the July 28 elections in Venezuela and has called for the start of a transition process. In a statement, he declared that “overwhelming evidence” shows that González Urrutia “achieved the majority of votes.” This Friday, the Governments of Argentina and Uruguay have joined in recognizing EGU's victory.

 

Back in Venezuela, as expected, the regime reacted to these diplomatic advances with its usual belligerence, a mixture of street stridency and circus, and threatened to break diplomatic and commercial relations with Spain. However, everything seems to be no more than a public stance. In parallel, the Minister of Oil, Delcy Rodríguez, was meeting with the Spanish oil company, Repsol, to hasten the pace of that operator's activity in the Mixed Company, PetroQuiriquire. We will see what Repsol's real appetite for Venezuela risk will be.

 

In general, the country remains in a kind of tense lethargy, which is observed in a noticeable reduction in vehicle movement even in the capital city. The same is happening with the decisions of potential investors and entrepreneurs, who are waiting for the panorama to clear, especially regarding OFAC sanctions, for now, limited to personal sanctions on 16 individuals of the regime related to electoral fraud and subsequent human rights violations.

 

The regime continues to cling to its economic approach of maintaining a high level of public spending, almost at the pre-election level, and anchoring the official dollar exchange rate. However, there are not enough dollars to comply with these two policies and finance imports, so the economy is beginning to suffer. The increase in the gap between the official and parallel dollar rates testifies to this. The fall in oil prices recently aggravates this foreign exchange tightness.

 

Oil Operations

 

This past week, several events shook oil activities, largely related to recurring electrical problems. The most significant was the total blackout at the Paraguaná Refining Center (CRP), which forced the total shutdown of the Amuay and Cardón refineries. The event occurred on Wednesday night. No official statement has been issued about the incident. However, some workers indicated that it was a catastrophic event in one of the electric generators that resulted in the fall of the entire system; others blamed an electrical storm in the Amuay area. The event seems to have been interpreted by the security forces as sabotage, and a large number of official vehicles from the police, army, and SEBIN were seen and filmed around the refineries.

 

In any case, the only refinery in operation in Venezuela is Puerto la Cruz, which requires light crude for its operation, which in turn is used as a diluent for the Merey 16 segregation; there are not enough volumes for both operations.

 

As a result of these events: 1) the supply of gasoline for the domestic market now depends on inventories and volumes received in the form of barter from Repsol. 2) Processing levels in Puerto la Cruz are limited by the availability of light crude. 3) For the blending of Merey 16, a series of condensate streams, light crude, and intermediate products are being used, which is causing quality specification problems that result in discounts in the price of that commercial segregation. It has been mentioned, without being able to independently confirm, that these difficulties in blending result in higher sulfur content. Due to shorter residence times in tanks, crude has been dispatched with up to 4% BS&W (sediment and water content) and sulfur, affecting downward the prices for those shipments.

 

Crude production during the week was eight hundred and thirty-six thousand barrels per day (Mbpd), an increase of almost 10 Mbpd compared to last week, but most of it is the recovery of deferred production due to electrical issues in previous weeks. The geographical distribution of average production is broken down as follows:

 

• West                          192 (Chevron 89)

• East                           140

• Orinoco Belt               504 (Chevron 104)

• TOTAL                       836 (Chevron 193)

 

Given the time it is taking to drill and complete the wells in PetroIndependencia, it appears that the program of 17 budgeted wells will be completed without difficulty.

 

As we mentioned at the beginning of this section, refining is very compromised, the average processing of crude and intermediate products for the week barely reached about 140 Mbpd.

 

Exports to the U.S. are in line with the program, an average of 226 Mbpd of crude has been dispatched to Gulf of Mexico refineries. Similarly, in exports to Spain, the program, about 64 BPD, is being met. Exports to other places have faced delays and obstacles due to the specification problems of the Merey crude and low inventories of upgraded Hamaca crude.

 

 

 

A MARKET IN CHRONIC DEPRESSION

El Taladro Azul  Published  Originally in Spanish in  LA GRAN ALDEA

M. Juan Szabo and Luis A. Pacheco

 

A MARKET IN CHRONIC DEPRESSION

Oil prices experienced their worst week since February 2022, before the Russian invasion of Ukraine. It is normal, if such a thing exists in this market, that market players seek the exit in response to the questioning of the health of the two largest economies in the world. Especially, if they already were in a bearish mood, as has been the case since July of this year.

 

The focus is on the broader macroeconomy and the negative impact that a faltering global economy could have on oil demand growth. This gloomy sentiment leads to the assumption that demand will only grow a fraction of what has been forecast. The information on subnormal economic growth in China and the recent indicators of the US economy could be interpreted as the prelude to a recession. It would not be surprising if this sentiment is reflected in the next demand forecasts of the International Energy Agency (IEA), which will take advantage of the situation to present an even more pessimistic demand estimate than the current one; it is also not surprising that OPEC will try to counter-argue, in the confusing counterpoint of these two important organizations.

 

We will contrast the recent price trend with our estimates and propose an alternative interpretation to the one that has settled in the market.

 

Fundamentals

That the Chinese economy has lost the growth capacity that led it to become the second-largest economy in the world is undoubtable. China's problems are multivariable, but it is not difficult to argue that at the center of them is over-centralization, which undoubtedly contributed to its growth, but today it is inflexible. China, in the search for growth, promoted large investments in many sectors, some of them were not necessarily profitable, decisions that are beginning to show their fragile base. For example, the over-investment in housing has resulted in what has been called a "real estate bubble", keeping the economy on the edge of a crisis; housing construction accounts for around 30% of the Chinese economy, that is, almost twice as much as in other industrialized economies.

 

On the other hand, investment in the manufacture of goods for exports that either lack sufficient demand or have generated protectionist reactions in the market also shows the cracks in the planner’s vision in Beijing. As if this were not enough, there is growing concern that the Chinese bureaucracy is beginning to cover up or hide economic figures, either to avoid contradicting the leadership's vision or to avoid scaring off foreign investors.

 

The effect on oil demand due to the lack of Chinese economic growth is quantifiable. Demand reduction is estimated at 300 to 500 MBPD vs. current 2024 and 2025 forecasts, respectively, including demand destruction due to the accelerated deployment of electric vehicles.

 

The concern about the state of the US economy seems less reasoned to us. It is based fundamentally on the recent figures for non-farm job creation, which were more anemic than expected. However, it does not seem enough to persuade the Fed, at its September 18 meeting, to implement a rate cut higher than the expected 25 basis points. In August, total non-farm payrolls increased by 142,000, while the unemployment rate stood at 4.2%.

 

We believe that the global economic situation does not indicate an imminent recession on the horizon, as apparently imagined by the oil market and reflected in the collapse of prices, particularly this past week. On the contrary, supporting the argument of robust demand, we observe that US commercial crude oil inventories continue their decline. The Energy Information Agency (EIA) reported a reduction of 6.8 MMbbls during this last week, far exceeding the expected 0.96 MMbbls by analysts, and maintaining the trend that keeps inventories at levels not seen since the end of last year. Meanwhile, as is normal at the end of the season, gasoline inventories increased by less than 1.0 MMbbls.

 

The pessimism about the future and the feeling of inevitability of the imagined destiny seem to have converged on the market and have cooperated to reinforce the perception that the future of oil demand is gloomy. These symptoms, if you will, depressive, are the ones the oil market has recently exhibited, which have also been contagious from the doubts shown by the stock markets in general (Dow, S&P and Nasdaq all fell between 3% and 4% during the week).

 

In addition to the nervousness regarding demand, the oil market also chose to self-flagellate by assigning to the supply levels of growth that are even difficult to achieve in theory. The market considers in its calculations the eventual openings of “closed crude” by OPEC+, and the production increases in the US, Canada, Brazil, Guyana, and Argentina. According to some analysts, this would represent a growth in global supply of 1.7 MMbpd in 2024, which would exceed the deteriorated demand levels currently envisioned by the market. If those predictions materialized, the market would become oversupplied with crude throughout 2025.

 

However, we believe that the demand/supply balances that have depressed the market have, on the supply side, an aspect that has not been properly considered: instability. The current global supply is 101 MMbpd, and if we just look at this week, several events have adversely affected production: the internal dispute in Libya, despite news of an eventual agreement, keeps more than 0.5 MMbpd closed; in Brazil, as a result of major maintenance and greater decline than estimated, crude production is around 250 Mbpd below the level at the beginning of the year; in Colombia, protests over the increase in the price of diesel, generated production shutdowns in various fields, the protest was brought under control, but the barrels closed have no replacement. All these events will be overcome, but they illustrate the reality of the market in that disruptions occur and are generally unpredictable.

The production increases forecast by the IEA for 2024-25, we have adjusted for our internal forecast, based on the announced revisions of floating production and storage unit (FPSO) entries and their corresponding “ramp up”, as well as the latest information from the producing companies, and our own estimates of production capacity decline. Based on these premises, the charts illustrate the high probability that the supply forecasts will be substantially lower than those factored in by the market.

 

 

Furthermore, the reductions and the overall decline that we factor in will cause the increase in supply to hardly exceed demand, even discounted, during the period under consideration.

 

On the other side of the coin, the uncertain OPEC+ in the short term, agreed on Thursday to delay by two months the gradual dismantling, scheduled for October, of its production cuts; this after oil prices fell this week to the lowest levels of 2024. The announcement caused the price to rebound, but on Friday they continued their fall to new annual lows after investors ignored the decision of the expanded cartel.

 

In an orthodox market, the weekly inventory reports in the US, and the high-impact decisions of OPEC+, would trigger significant movements in the oil markets, but not on this occasion. The pessimistic sentiment is so prevalent that the collapse of US commercial inventories and the cartel's decision to postpone the return of barrels to the market barely resonated. This reinforced the oil market's belief that next year the balances will tilt strongly towards an oversupply. This dynamic may not necessarily prevail.

 

Here is the English translation of the document:

 

Geopolitics

 

Eleven months have passed since Hamas' incursion and the massacre perpetrated in Israeli territory, with skirmishes and deaths of terrorists and civilians in Gaza, as well as hostilities in the Golan Heights and the West Bank. Negotiations for a ceasefire do not seem to be heading towards an imminent agreement. But, no large military action is foreseen from any of those involved, pointing to a relatively low probability of escalation that would put oil supply at risk. Meanwhile, Israeli Prime Minister Benjamin Netanyahu is facing pressure after it was revealed that 6 Israeli hostages were executed when Hamas sensed they were about to be rescued.

 

In the Russia-Ukraine war, the Russians have continued doing the same thing they have done for most of the three-year invasion: launching numerous drones and missiles against civilian targets and energy infrastructure, but without material progress in terms of moving the initially invaded borders — a kind of 21st-century trench warfare. The creativity and innovation have come from the Ukrainian army, taking by surprise a good part of the Russian region of Kursk, including important gas dispatch infrastructures. Additionally, Ukraine has managed to damage bridges that prevent the Russian army from defending or recovering the area. Furthermore, due to the shortage of international armaments, Ukraine is using locally manufactured flamethrower drones to attack fuel depots in the regions around Kursk, as well as attacks on refineries, even near Moscow. These new strategies have affected Russia's product inventories and refining capacity, resulting in failures in the army's supply chain, and weakening its internal fuel market and indirectly hydrocarbon exports.

 

Price Behavior

Thus, prices continued to fall to the lowest levels in the last two years, completely erasing the accumulated gains so far this year. A hard blow for the oil market and producing countries, but also a possible opportunity to position oneself in this market, if the readings that the market is making represent an exaggeration of the real conditions. But always with the warning that the "market is the market" and it is what determines prices. As an example, current prices represent a weekly loss in oil revenue of almost $300 million for Saudi Arabia and savings of $130 million for India.

 

The benchmark crudes, Brent and WTI, at the close of markets on Friday, September 6, were quoted at $71.06/bbl and $67.67/bbl respectively. A loss of value of almost 8% compared to the previous week.

 

VENEZUELA

Distraction And Repression

 

After its electoral fraud, the Maduro regime, far from trying to find solutions to the crisis it has manufactured, insists on its strategy of repressing without much regard for human rights. They seek to distract the country and the international community from its old and new failures. Thus, faced with the power outage that the country suffered, it chose the fable that the blackout was a sabotage programmed by opposition politicians seeking asylum in the Argentine embassy in Caracas, currently in charge of Brazilian diplomacy. 

On the other hand, and in apparent retaliation for critical statements by President Lula, the regime withdrew the approval it had granted to Brazil to take charge of Argentina's diplomatic headquarters. In parallel, the political police, SEBIN, surrounded the embassy and cut off the electrical service to the diplomatic headquarters facilities, violating international diplomacy rules. It is speculated that they may have plans to kidnap the asylum seekers and accuse them of conspiracy, anything to cover up the magnitude of the increasingly proven electoral fraud.

 

Faced with the facts, Argentina issued a warning statement to the Venezuelan authorities, and the Brazilian Government reiterated its protection of the embassy and those who take refuge in it. "Actions like these reinforce the conviction that in Maduro's Venezuela fundamental human rights are not respected," stated a communiqué from the Argentine Foreign Ministry.

 

During the week, prosecutor Tarek William Saab made good on his threat to issue an arrest warrant against the elected president, Edmundo González Urrutia, for alleged crimes related to the elections and their results. This Sunday, September 8, it was made public that González Urrutia, who was protected in the embassy of the Netherlands in Caracas, left the country for Spain under the figure of political asylum; the product of a negotiation with the Maduro regime. The effects of this decision on the struggle to defend the electoral result of July 28 are yet to be seen. 

 

For her part, the opposition leader, Mara Corina Machado expressed her support for the elected president's decision. Machado reaffirmed her commitment to the country and her position to remain at the forefront of the fight for the recognition of the popular will expressed in the July 28 elections.

 

In a surprising announcement, an investigation by The Washington Post revealed that a lawyer representing the Maduro regime is the sister-in-law of the prosecutor of the International Criminal Court (ICC), Karim Khan. She is Venkateswari Alagendra, who has defended the regime before the court for alleged crimes against humanity. This situation would have generated complaints within the entity and, despite the relationship between the prosecutor and the lawyer, Khan has opposed the legal appeals presented, says The Washington Post.

 

Moreover, this week, former Colombian president Andrés Pastrana, representing 31 former Ibero-American heads of state and government, integrated into the IDEA Group. Pastrana urged this Friday the International Criminal Court (ICC) to issue an arrest and detention order against Maduro and his chain of command for crimes against humanity and state terrorism practices in Venezuela. All this adds to the diplomatic siege that has been growing in the face of the actions of the Maduro regime.

 

Another news of less relevance, but which has received wide international coverage, is the seizure of one of the planes that provide service to Maduro, which was in maintenance in the Dominican Republic. U.S. authorities consider that the aircraft was acquired illegally, violating that country's sanctions policy. A sample of what can happen with the regime’s assets and its cadre of cooperators.

 

On the other hand, the individual sanctions that have been mentioned could be imposed by the EU and the US, in response to the electoral fraud, the violent abuses against protesters, and the violation of human rights of dissidents, have been conspicuous by their absence. However, as J.I. Hernández explains, the strict compliance with existing sanctions alone would intensify their effect.

 

In an attempt to hedge against a change of opinion in the Biden administration, Chevron's lobbying group, headed by its executive president, defended its activity in Venezuela before the White House and the State Department. They claimed that the 200 Mbpd that reached the US from Venezuela helped to keep automotive fuel prices under control; a precarious reasoning in a market of almost 20 MMbpd. They also maintain that Chevron's presence, the only remaining US company in Venezuela, has a strategic value to prevent its absence from being filled by companies from authoritarian countries, China and Russia. This is a curious argument coming from a company that seeks to be a partner of the Chinese in Guyana.

 

The position of the North American oil company puts to the test the usefulness of the "ESG" (Environmental, social and corporate governance) commitments assumed by multinational companies like Chevron. These criteria are an approach that allows evaluating to what extent a corporation works on behalf of social objectives that go beyond the role of a corporation to maximize profits on behalf of the corporation's shareholders.

 

The crude reality is that Chevron's arrangement with the regime has a legitimate economic origin. It allows Chevron to recover the bulky debt that PDVSA has with the North American oil company, for expired loans and declared but unpaid dividends. The attached graph illustrates the current and projected debt situation.

 

Source: Own calculations assuming public information

 

The other side of the coin is that the regime's economic program is based on the level of tax collection by SENIAT and oil revenues. Tax collection has reached high levels since the introduction of the corporate payroll tax. Oil revenues and access to foreign currency largely depend on Chevron's activities in Joint Ventures with PDVSA. Currently, around 57% of oil sales revenues come from Chevron and Repsol (see graph);Chevron for now represents 85% of that total. The remaining 43% corresponds to commercial sales to China and India by PDVSA.

 

Source: Own calculations. Projection assumes continuity in licenses

 

The regime has maintained a high level of public spending, similar to the final stage of the electoral campaign, for which it has had to supplement tax collection with oil revenues in foreign currency. At the same time, it has continued with its policy of anchoring the official dollar, injecting high amounts of foreign currency into the exchange market, and generating a shortage of foreign currency to finance imports. This will be aggravated by the fall in oil prices, opening the gap between the official and parallel dollar.

 

Oil operations

The month of September has passed to date without any news affecting oil activities, despite power failures.

 

The new Minister of Oil, Ms. Delcy Rodríguez, visited the Orinoco oil belt, where she was received by workers dressed in impeccable red overalls, a captive audience to the minister/vice president's political harangue.

 

Crude oil production during the week was 827 Mbpd, geographically distributed as follows:

 

• West                                     190 (Chevron 87)

• East                                      140

• Orinoco Belt                          497 (Chevron 103)

• TOTAL                                  827 (Chevron 190)

 

It has not been confirmed, but the start-up of the second drilling rig in PetroIndependencia is either delayed or canceled. In any case, Chevron should be able to complete the seventeen wells programmed for this year.

El Palito refinery continues to be non-operational, and the Puerto la Cruz refinery, still in the final stages of maintenance, does not have access to the crude it needs to process. Available light crude, natural gasoline, and condensates are being diverted to blend volumes of Merey 16, due to the low runs of the PetroPiar upgrader. The processing of crude and intermediate products was 215 Mbpd. The refining yield in terms of gasoline and diesel was 68 and 71 Mbpd respectively.

 

The crude export figures are regularly published in the media, but due to their diversity can confuse the reader, but ultimately are the product of the methodology and nomenclature that each source uses and which is not always stipulated. For the sake of transparency, we will briefly explain below the methodology we use in this report.

 

As a base case for crude oil exports, the monthly exported volume can be estimated starting from the production not dedicated to national refining, currently 612 Mbpd, adjusted for losses in upgrading. If we add the use of imported diluent, it would result in a volume available for export of 619 Mbpd. This base volume, in turn, would have to be adjusted for increases/decreases in inventories to arrive at the volume exported. Another matter is the export of refined products, petrochemical products, or petroleum coke, which adds to the figure,

 

For September, the schedule indicates 640 Mbpd of crude exports, but it is too early in the month to track compliance.