El Taladro Azul Published Originally in Spanish in LA GRAN ALDEA
M. Juan Szabo and Luis A. Pacheco
The relationship between Volodymyr Zelensky and Donald Trump has never been easy or close. During Trump's first administration (2017-2021), there were notable tensions, particularly during the scandal known as "Ukraine-gate" in 2019. This episode involved a phone call between Trump and Zelensky in which military aid was allegedly conditioned on investigations into Hunter Biden (Joe Biden's son), leading to Trump's first impeachment.
However, despite this notorious lack of empathy between the two leaders and the recent friction between the two presidents, most of the world expected U.S. military support to continue to obtain a resolution to the conflict with Russia, although certainly in the transactional manner of the American president. It was taken for granted that the importance of keeping Russia's territorial ambitions at bay for the West would lead to maintaining a sort of relationship of convenience between Washington and Kyiv.
After the week's events in Washington, all those expectations proved to be built on quicksand. The White House meeting, which had been convened to sign an economic development agreement between the U.S. and Ukraine, descended into chaos after a heated discussion between Presidents Trump and Zelensky, with Vice President J.D. Vance participating in an improvised press conference in the Oval Office.
The scandalous disagreement between the three politicians was broadcast live to the whole world on television, including the unusual presence of the Russian news agency TASS, generating all sorts of opinions and speculations. After the meeting, the Ukrainian delegation met with the Americans, but little could be saved or agreed upon. Zelensky and his entourage were invited to leave the White House without much protocol. The real reasons behind such an adverse event, or whether it was a spontaneous or planned disagreement, are unknown. One possible explanation is that the security requirements Zelensky put on the table did not align with what was agreed in the first meetings between the U.S. and Russia in Riyadh. The unusual public disagreement was how the Trump administration showed its displeasure with Zelensky's position, accusing him of not wanting peace.
The unfortunate meeting, which should have concluded with an agreement between the U.S. and Ukraine on exploiting specific resources in that country, contributed to maintaining the lethargy in prices the oil market finds itself. Oil market actors are still trying to digest the dizzying occurrence of events. Still, in their stupor, they didn't even manage to react to the fall in commercial crude inventories in the U.S. and the apparent cancellation of Chevron's license 41 in Venezuela. Oil markets are downplaying any possible short-term supply disruption.
GEOPOLITICS
The not-so-unexpected breakdown of negotiations between the U.S. and Ukraine is today the most important geopolitical development. The new scenario, if the parties don't reconsider, is one where Ukraine tries to survive with European aid without the effective weapons and ammunition from the U.S. This would be an uphill process in the short term, as European leaders hardly back their declarations of support for Ukraine with relevant actions on the battlefield. In any case, on Sunday, in an emergency meeting in London, with Zelensky's presence, a broad group of European leaders reaffirmed their commitment to present and future support for Ukraine and to limit Russia's expansionist threat. Zelensky took the opportunity to express his regret about the event at the White House, trying to build bridges.
All this is music to the Kremlin's ears. "Historic," wrote X social media, Kirill Dmitriev, one of the Russian negotiators, in the talks held on February 18 between the U.S. and Russia in Saudi Arabia. In a bit more Russian style, the number two of the Russian Security Council, Dmitri Medvedev, said about Zelensky: "For the first time, Trump told the truth to the face of the cocaine-addicted clown. "
After he departed from the White House, Zelensky wrote a message on the X network that could be interpreted as conciliatory, thanking everything the U.S. has done for Ukraine. During the meeting at the White House, Oksana Markarova, Ukraine's ambassador to the U.S., covered her face with one hand while shaking her head in desperation. This image has become the symbol in Ukrainian media of how what happened this Friday at the White House has been interpreted in that country. There was hope that the verbal agreement reached the day before between the two countries to exploit Ukrainian minerals would reverse previous differences. However, it did not happen that way.
Things for Ukraine are now more complicated. There is speculation that they could even end in Zelensky's resignation to make way for new actors. In Europe, the concern is broader, as they see this change in U.S. policy as a signal to the Kremlin that they are willing to condone its expansionism, with the dangers of a broader conflict on the old continent. In any case, with Trump, it's never sure when he'll make the next U-turn.
Meanwhile, in the Middle East, the first six-week phase of the ceasefire in Gaza ended on Saturday. The 42 days since January 19 have had their share of uncertainty, hope, pain, and anger, but everything that should have happened during that time occurred. Negotiations on the second phase, including the release of all living hostages and the withdrawal of Israeli troops from Gaza, have barely begun. Talks began in Cairo on Friday, but the Israeli delegation returned to their country that night; supposedly, negotiations would continue "at a distance." At first glance, the condition expressed by Hamas for a new agreement, that Israel withdraw its troops from Gaza, looks like an insurmountable obstacle.
If one tries to view the world globally, the situation in Ukraine and the cessation of hostilities in Gaza are not totally independent. The U.S. seeks to impose drastic changes in geopolitical and economic relations. However, international powers and institutions are not seeking to adapt to these changes or do not want to. Trump works with the assumption that Russia's military and political failure in its invasion of Ukraine is evidence that the old enemy does not pose a real threat to the world, as the former USSR did. Zelensky, on the contrary, totally immersed in the war, the daily air raid sirens, and the death of his soldiers and civilian population, sees in Russia a perennial threat that must be dominated so that it does not take control of his country or invade or harm its neighbors. For Ukraine and other neighboring countries, the war is a daily reality, a trauma from the past difficult to erase, and that will have to be managed by European countries. But being realistic, when wars end without an indisputable winner, a few more or fewer kilometers of territory do not change the balance of world powers.
The new world order, which the Trump administration wants to facilitate or perhaps even impose based on its economic and military hegemony, is one where the U.S. maintains clear leadership, no longer as the world's police but measured by its ability to generate economic domination. Primarily for itself, but which, due to the size of its market, would have repercussions on what it considers its sphere of influence. The approach that Trump intends to establish with Russia aims to distance it from China, which is trying to reinvent itself to solve its economic problem and become the hegemon of Asia and the substitute for the U.S. in the southern hemisphere. The European Union and the United Kingdom find themselves in a very complex situation, seeking a role outside the sphere of the Atlantic alliance; they will have to come to terms with Russia and Ukraine in the post-invasion scenario, whatever the outcome.
The presence of Saudi Arabia in the negotiations between the U.S. and Russia, as we noted last week, is not casual. It intends to take for granted that due to its energy power and weighted position in the conflict with Israel, the desert kingdom is called to be the regional leader, in clear opposition to Iran.
On this side of the Atlantic, on the morning of Saturday, March 1, 2025, a Venezuelan patrol vessel entered Guyanese waters. During this incursion, the Venezuelan vessel approached an oil tanker near a Floating Production, Storage, and Offloading Unit (FPSO), the Prosperity. The Guyanese government reacted immediately, identifying the patrol boat as ABV Guaiquerí PO-11 (IMO 4695542), a Venezuelan coast guard, and alerted that both the oil tanker and the FPSO operate legally within Guyana's exclusive economic zone. The patrol boat transmitted a radio message declaring that the FPSO was operating in "disputed international waters" before continuing its course southwest toward other FPSOs.
The Office of Western Hemisphere Affairs of the U.S. government reported the threat of Venezuelan warships to ExxonMobil's unit (FPSO), stating that the incident was unacceptable. Additionally, the office warned about the consequences for Nicolás Maduro's regime if a similar incident occurs again. "A clear violation of Guyana's internationally recognized maritime territory. Any additional provocation will have consequences for the Maduro regime. The U.S. reaffirms its support for Guyana's territorial integrity and the 1899 arbitration award," according to the office's X account.
FUNDAMENTALS
It was another week when the fundamental parameters of supply and demand in the oil market were ignored or displaced by the winds blowing in geopolitics, which goes beyond the simple rise or reduction of geopolitical risk based on particular events. The market simply has not been able to decipher the outcome of multiple interactions where border protection, the fight against drug trafficking, and the termination of wars are mixed. Added to this is a sea of announcements of tariffs and taxes as a mechanism of protection or competition that the U.S., due to the size and importance of its economy, can afford to impose on its partners and adversaries.
So, the fact that commercial crude inventories in the U.S. fell by 2.3 million barrels, despite higher crude imports, had little effect. Nor did the announcement of the eventual cancellation of OFAC's license 41 and possibly other similar licenses, which support part of Venezuelan production, affect oil prices. The eventual resumption of Iraqi exports from Ceyhan with Kurdish crude does not represent a material change in crude oil placed on the market but rather a change of destination.
The U.S. continues to produce crude oil at around 13.2 million barrels per day. OPEC+ continues at 40.6 million barrels per day and is maintaining its plan to open closed oil in April 2025. The increases forecasted for early 2025 have not materialized in Canada or Brazil.
In summary, market fundamentals have not registered material changes in the last two months. The market is having difficulties evaluating the impact of all the energy-related announcements from the Trump administration. On Thursday, the American president again mentioned that 25% tariffs on Mexican and Canadian products will come into effect on March 4, along with an additional 10% tariff on Chinese imports.
Oil and financial market participants are reducing their exposure to risks amid growing volatility caused by the intensification of the tariff war, especially against China. This has significantly increased concerns about global crude demand due to the slowdown in global growth and the rebound in inflation that was thought to be controlled.
In a minor but exciting development, the British multinational BP announced a structural change in its strategy. The oil company has made a big bet on becoming an alternative energy company in recent years. Now, it is redirecting its focus back to fossil fuels, trying to compete with its peers that have taken the lead in market value and keeping up with the changes in climate policies around the world.
PRICE BEHAVIOR
It was another atypical week, with geopolitical activity dictating the guidelines for markets, including oil. Oil only tried to stay afloat amongst the events dragging it down, with a negative perception around the potential drop in demand, which caused another weekly loss of approximately 2%.
Thus, at the close of markets on Friday, February 28, 2025, the benchmark crude oils Brent and WTI were quoted at $72.81/bbl and $69.76/bbl, respectively, with WTI breaking the theoretical floor of $70/BBL.
VENEZUELA
THE LICENSES – Crisis or Opportunity
A message from President Trump via his social network finally broke the cellophane on February 26, announcing that he had decided to cancel the "oil concessions" that Biden had granted to the Maduro regime via the licenses signed on November 26, 2022. The news spread like wildfire and has been interpreted in countless ways. The reality is that until the details of the cancellation and its "wind down" scheme are published, all interpretations correspond to more or less educated speculations – at the close of this column, we do not have specific information.
We must understand that a license cancellation, effective when published by OFAC and with a dismantling period of zero to six months, would collapse foreign currency income by at least 50% starting in September 2025. This would affect the already precarious shortage of foreign currency in the economy and lead to an acute devaluation of the national currency and inflation levels in the three digits, with no cap.
However, it is unknown if the U.S. administration intends to terminate these licenses to start some new oil or political agreement that fits within the new international order conceptualized by Trump. A brief publication, at the last minute, by OFAC allows for any interpretation, and we will have to wait for the detailed texts. It is interesting to note that, despite a note issued by Vice President Delcy Rodríguez rejecting the cancellation of the licenses, the regime has been very prudent in the political management of the issue to leave negotiation options open.
Regardless of what happens with the licenses, the economy continues in a downward spiral without brakes. Devaluation and inflation remain out of control, despite the regime's attempts with significant injections of foreign currency into the market and manipulations to generate liquidity to facilitate tax collection in this month that begins.
In the internal political aspect, the regime has introduced divisions in the opposition unity formed to seek change and enforce the results of July 28. For example, Henrique Capriles and Tomás Guanipa's advocacy for participation in the May elections has generated a de facto division in the Primero Justicia party. Still, it is estimated that this will not have a significant effect on the general unity of the opposition around María Corina Machado and Edmundo González.
Oil Operations
Oil activities had little to do with discussions about the future of OFAC licenses. Since Trump took office, no licensees have initiated incremental activity or investment. The operational report sounds repetitive regarding the shortage of natural gas and its liquids for the domestic market: petrochemical and domestic. Naphtha and diluent continue to be imported.
Crude production during the last week averaged 866 thousand barrels per day, geographically distributed as follows:
• West 216 (Chevron 100)
• East 128
• Orinoco Belt 522 (Chevron 119)
• TOTAL 866 (Chevron 219).
The month closed with an export of 653 thousand barrels per day. The exported segregations were 99 thousand barrels per day of Boscán crude, 447 thousand barrels per day of Merey-16, and 104 thousand barrels per day of Hamaca. The destinations were the U.S., 268 thousand barrels per day; China, 199 thousand barrels per day; India, 123 thousand barrels per day; and Europe, 63 thousand barrels per day. Refining runs averaged 216 thousand barrels of crude and intermediate products per day, with a gasoline yield of 79 thousand barrels per day and 74 thousand barrels per day of diesel. The average sale price of barrels marketed under OFAC licenses, net of debt payment, was $50.8/bbl.
