M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
DRONE FLIGHTS MOVE THE MARKET
Oil prices took on a new upward momentum following the Ukrainian drone attack on the Russian port of Primorsk, a key terminal in the Baltic Sea for crude oil and petroleum products flow. On the other hand, Moscow added a new dimension to the conflict by launching 19 drones over Poland, which precipitated NATO intervention.
The Trump administration's response to these Kremlin actions has been to increase pressure on European Union (EU) members to suspend their purchases of hydrocarbons from Russia. Also, other countries should implement secondary sanctions on India and China, which continue to buy Russian crude. All these geopolitical factors are now the main bullish factor for prices. As if this weren't enough, the world watches with concern the intensification of geopolitical conflicts, such as those in Nepal, France, and Venezuela.
Regarding possible effects on the natural gas market, the complex handling of the Gaza conflict could impact the natural gas pipeline supply agreements from Israel to Egypt and the LNG market in the region.
Meanwhile, the backdrop of possible excess oil production that the International Energy Agency (IEA) has been advocating is being questioned, although it still weighs on oil prices.
GEOPOLITICS
The New World Order
The multiplication of geopolitical conflicts in 2025 is no coincidence; we can postulate that it is part of a series of transformations challenging the world order established since the end of World War II. Emerging powers (China, India, Turkey, among others) challenge established rules. At the same time, the U.S. adopts a more isolationist and nationalist stance under Trump's leadership, and Europe cannot find its role in this new order.
This process is complemented, on one hand, by the lack of effectiveness and ideologization of what appears to be an already archaic governance model of multilateral institutions (UN, IMF, WTO) that have turned them into inoperative bureaucracies to face globalization crises: climate change, drug trafficking, and populism, among others. On the other hand, with few exceptions, citizens perceive that their governments do not respond to their needs, both in democracy and autocracy.
Finally, social media has enabled the spread of violent discourse and the viralization of biased and often false news. In its most powerful use, however, it has allowed the organization of movements like the Arab Spring and, recently, “Gen Z Nepal,” which channel frustrations and demands quickly and massively. Therefore, networks, just as they are targets of censorship, are also used by governments as control tools.
Globally, this has generated massive protests in countries as diverse as France, Brazil, Iran, and Nepal. Wars are no longer fought only with traditional weapons: they now include cyberattacks, disinformation, and economic sabotage, which weaken the adversary's social and economic structures.
Russia-Ukraine Conflict
In the conflict between Russia and Ukraine, Ukraine's drones attacked the port of Primorsk, the endpoint of Russia's largest oil terminal in the Baltic Sea. The drones hit a ship in the port and a pumping station, causing a fire and interrupting crude oil shipments to and from that terminal.
Additionally, they attacked several oil pumping stations to affect the main pipeline system that supplies the Ust-Lugaterminal, which had already been targeted in an attack in July. Preliminary estimates suggest that export disruptions could cost Russia approximately forty million dollars per day, not considering the damages and loss of operability in Ust-Luga.
Also related to the Russian hydrocarbon commercialization system, and in response to U.S. pressure, India's largest private port operator, Adani Group, has banned the entry of oil tankers sanctioned by Western countries at all its ports. This measure could impact Russian oil supplies to two important Indian refineries.
The Escalation with Poland and NATO
On the Russian offensive side, in addition to their numerous drone and missile attacks on Ukraine, more than a dozen Russian drones violated Polish airspace on Tuesday night. This incursion forced NATO to mobilize combat aircraft to intercept the incursion, in what Western officials described Wednesday as a dangerous escalation of the war in neighboring Ukraine. The Russian excuse that these were drones that missed their target was quickly dismissed and is considered to have been a trial balloon to gauge NATO's reaction.
It is the first time in NATO history that alliance fighter aircraft attacked “enemy” targets in allied airspace, authorities said. The drone incursion led the Polish government to invoke Article 4 of the NATO treaty. This rarely used mechanism is activated when an alliance member feels threatened, leading to formal consultations. “We are facing a large-scale provocation,” said the Polish Prime Minister. “The situation is serious, and no one doubts that we must prepare for various scenarios.”
NATO air forces mobilized to face the incursion. According to Mark Rutte, NATO Secretary General, they included Polish F-16 fighter jets, Dutch F-35s, German “Patriot” air defense systems, and an Italian “AWACS" surveillance aircraft. There were no immediate reports of casualties in Poland.
Donald Trump has again threatened to impose harsher sanctions against Russia after the most extensive air bombardment on Ukraine since the war began and the incursion into Poland. Kremlin spokesperson Dmitri Peskov declared that no sanction could force Russia to “change the consistent position that our president has spoken about repeatedly.” When and if the White House materializes its threats against the Russians remains unknown.
Conflict in Gaza and the Middle East
In the development of the war that Israel is carrying out to annihilate Hamas, they bombed the tall buildings of Gaza City, allegedly for being observation bases used by Hamas. Subsequently, Israel has warned all city residents to abandon it immediately ahead of a massive ground offensive to take control of this last Hamas stronghold.
The process to achieve a cessation of hostilities was suspended after the Israeli attack on Hamas's operations center in Doha, Qatar. Attempts to relaunch peace and ceasefire negotiations have been unsuccessful. Bassem Naim, a member of Hamas's political office, stated that the militant group will not lay down arms until the establishment of an independent Palestinian state with Jerusalem as its capital. However, he said that Hamas is willing to accept a long-term truce and will release the hostages still held in Gaza in exchange for several Palestinians imprisoned by Israel and the complete withdrawal of Israeli troops from Gaza. This is a conflict that continues going in circles.
In the parallel conflict with the Yemeni Houthis, a drone launched in Yemen violated Israel's air defenses on Sunday and crashed into the country's southern airport, the Israeli military said. It was one of various drones launched by the Houthis, according to the military, adding that most had been intercepted outside Israel.
Crisis in Nepal
Nepal is becoming a new "hot spot," far from the oil and gas producing zones. The Asian country between India and Tibet is renowned for its temples and the Himalayan mountains, among which the world's highest peak, Everest, rises. However, it is experiencing a severe political and social crisis. During the week, a series of protests broke out led by young people who oppose the government's ban on some social networks, which they accuse of being corrupt.
Thousands of demonstrators took to the streets and marched through the capital, Kathmandu. These demonstrations are different from those seen before in Nepal. They have emerged in social networks and spilled into the streets, led by the country's youngest generation. The protesters identify themselves as "Generation Z," the age group born approximately between 1997 and 2012.
On Tuesday, the Nepalese Prime Minister, K.P. Sharma Oli, submitted his resignation immediately and called for “cooperation to resolve the country's difficult situation peacefully.” The resignation came a day after government forces opened fire on demonstrators amid street clashes that left an initial toll of 19 deaths. The interim government has reported that at least 72 people died and well over two hundred were seriously injured in the riots.
Political Crisis in France
Meanwhile, French politics is going through a complex trance. With only three months in office, the prime minister lost a confidence vote over his recommendations to cut budgets due to overwhelming debt and had to resign. The new prime minister, previously the defense minister, must achieve congressional approval to survive. The right, led by the party of Marine Le Pen, calls for President Macron's resignation. That one of the EU's bastions (along with Germany) is in a political and economic crisis is bad news for the old continent and the West as a whole.
FUNDAMENTALS
The Myth of Peak Fossil Fuel Demand
Javier Blas, a well-known energy sector journalist, has written an article in Bloomberg titled “The myth of peak fossil fuel demand is falling apart.” Blas indicates that the belief held by many analysts and policymakers that the world was approaching an imminent peak in demand and a decline in fossil fuel consumption is not supported by actual demand data, particularly from emerging economies.
On the contrary, the Bloomberg article reports that reality has forced the IEA to make another material revision in its annual report draft, which is about to be published. With current policies, the use of oil and natural gas is expected to increase until 2050, a significant change from previous projections.
In a recent Energy News Beat podcast, Trisha Curtis, CEO of Petro Nerds, linked the growth in hydrocarbon demand to investors' seeking profitability, which is not happening in the wind, solar, and hydrogen energy sectors. It's not simply a minor adjustment: “It's a radical change highlighting the world's continued dependence on fossil fuels amid growing demand from major economies.”
Countries like China and India are increasing their oil, gas, and coal consumption, contributing to a global energy landscape that still favors fossil fuels. The same can be said of demand for fossil fuels in non-energy sectors, such as plastics production and other petrochemicals.
This alleged change in the IEA's vision will not surprise our readers since, as we have argued in this space before, the IEA's projections seemed to respond more to an ideological stance than to the complexity of transforming the global energy matrix. This change in projections will undoubtedly create new unknowns that need to be resolved on the supply side.
Production Situation
In North America, the hydrocarbon production sector has stagnated due to low prices. Oil potential generation projects in the U.S. and Canada await a more precise definition of where the oil market is going, a definition difficult to pin down amid announcements of opening more production from OPEC+.
As we already mentioned, Russia's capacity to transport crude through its pipeline system and to load tankers at the Primorsk terminal has been severely affected, and this is without considering the crippled tanker, one of the ghost fleet. The real effect can be estimated in the coming weeks.
Recently, OPEC+ has been characterized by announcements of large production openings and disappointing results when materializing those announcements. The latest announcement, applicable to October, was more restrained and also includes adjustments for previous surpluses. The delays in compliance reflect the investment and expense requirements to convert what is reported as potential into real production.
In other latitudes, erosions in production are observed in Colombia, Ecuador, and Mexico, among other producing countries.
PRICE DYNAMICS
Ukraine's attacks on the Russian oil system, combined with Houthis' threats to maritime transport in the Red Sea and the tense situation around Venezuelan activities, have caused an increase in geopolitical risk that has pushed up both prices and their volatility. This moderate upward trend was limited by the EIA report, which indicated increases in commercial crude oil and gasoline inventories in the U.S.
Thus, at market close on Friday, September 12, the benchmark crudes, Brent and WTI, were trading at $66.99/bbl and $62.69/bbl, respectively, about a 2% increase from the previous week's close.
VENEZUELA
Shadow Boxing
The Venezuelan regime has decided to change its original strategy of dismissing the U.S. naval play on its Caribbean front to one of defiant rhetoric, internal military mobilization, and delegitimization of American accusations; it moves the conflict to the symbolic and strategic terrain, trying to erect a rhetorical defense. This confrontation is not just a bilateral tug of war; it is reconfiguring the regional chessboard and generating waves in energy markets.
Nicolás Maduro has tried to generate national unity against the “common enemy,” forcing the population to carry out weapons exercises and conduct military drills. On the other hand, Maduro has decreed the beginning of Christmas from October 1st, a tactic he has used in past years to good effect.
Negotiations and Perspectives
Various sources indicate secret negotiations between the regime and the White House, although there is no clarity about what is being negotiated. In any case, both investors and the legitimate opposition think there could be significant political changes in what remains of the year. As we have said on several occasions, dawn will come, and we'll see.
Economic Situation.
The continued deterioration of the economy accompanies the delicate political situation. Still, with apparent overconfidence by authorities that Chevron's activities will help reverse the recessionary trend and the uncontrolled growth of inflation, which is not published, but everyone knows the direction it is taking.
The continued reduction in foreign currency availability has generated a prohibitive gap with the parallel rate that has reached 60% despite the slide of the official exchange rate. To patch up this situation, the BCV limited the supply of foreign currency through the official route and apparently uses the rest of the foreign currency it controls to promote a quasi-free supply process using the USDT cryptocurrency, mainly through the international Binance platform. The experiment was partially successful, as the gap between exchange markets, at the close of the week, was reduced to 38%.
The Binance platform, which is mainly used for low-amount transactions, was overwhelmed by the Venezuelan process with transactions of many millions of USDT, which opened the opportunity for hackers to scam users, to the point that the platform was forced to publish a warning. In any case, the official exchange market closed the week at around 160 Bs./$.
An increase in traded volumes was evident in bank exchange tables, probably related to Chevron's initial requirements for its return to operations.
Oil Operations
Crude Production
Crude production during the last week averaged eight hundred sixty thousand barrels per day (860 Mbpd), geographically distributed as follows:
Occidente 223 Chevron: 109
Oriente 120
Faja del Orinoco 517 Chevron: 119
TOTAL 860 Chevron 228
Chevron's production showed a slight increase, but it is still around 20 Mbpd below the levels achieved under General License 41. The small variations in production, week to week, correspond to the incorporation of wells into production through repair work activities, mainly without Ra/Rc rigs in the joint ventures PetroBoscán, PetroZamora, and PetroIndependencia.
Refining and Petrochemicals
National refineries processed 230 Mbpd of crude and intermediate products, with a yield in terms of gasoline of 76 Mbpd and diesel of 78 Mbpd.
In the petrochemical sector, methanol plants and ammonia-urea trains operate at 80% of their nominal capacity. The SuperOctanos plant is starting up and is planned to operate for a month to consume the isobutane available in José. Active plants operate at capacities limited by natural gas availability.
Exports
So far, crude exports correspond to 6 shipments with a volume of 7 MMbbls, corresponding to a level of about 600 Mbpd. Three of the six tankers departed for the U.S. with 1.2 MMbbls.
We estimate that the weighted price of exported crudes is $32.1/bbl.
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