OPEC+ ANNOUNCEMENTS SPOOK THE MARKET

 El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA

A week is a long time in today's economic and political situation. The extrapolation of trends created by President Trump's tariffs and commercial upheaval and the intuition that production increases announced by OPEC+ would only materialize partially suggested rising prices. However, the market's unpredictability struck again, and the week's events and news pressured oil prices downward.

• OPEC+ indicated it is debating whether to implement another production increase starting in July 2025, which would bring the total barrels "returned" to the market to close to 1.5 million barrels per day (MMbpd).
• President Trump threatened the European Union with 50% tariffs starting in June due to a lack of progress in trade negotiations between the European bloc and the US. In the same tone, Trump notified Apple that he would impose a 25% tariff if they didn't manufacture the iPhones sold in the US locally.
• The US House of Representatives approved Trump's controversial fiscal package by a narrow majority. The package includes tax cuts and increased spending and could increase US debt by more than three trillion dollars over the next decade. Trump had to negotiate with various factions of his party that expressed doubts about the proposed law. The package now goes to the Senate, where Republicans have a 53-47 majority, which will likely seek changes. Any changes introduced require the bill to return to the House for a new vote.
• According to the weekly report from the Energy Information Administration (EIA), commercial crude and gasoline inventories increased by 1.4 and 0.8 million barrels (MMbbls), respectively. These changes, in addition to the supply and demand balance, are the arithmetic result of higher refinery processing, overcompensated by higher crude imports by the US.

Most of these events or news pointed toward an oversupplied market by year-end, which was reflected in oil prices. However, today's data on production and demand don't fully support that projection. In any case, the oil market opted to lean toward pessimism.

Fundamentals

News emerging from within OPEC+ displaced the White House as the primary cause of uncertainty traversing the oil market. Some institutions and analysts question the accelerated dismantling of the strategy to keep production volumes close to manage the oil market balance effectively, and therefore, price levels. The fact is that OPEC+, mainly pressured by Saudi Arabia, changed tactics. Although the reasoning justifying it is unclear, their announcements indicate they seem willing to add almost one and a half million barrels per day (1.5 MMbpd) to supply between April and July. The decision to open another 411,000 barrels per day, corresponding to July, is still being debated within the organization, but the mere mention of the possibility has spooked the market.

In light of forecasts published by the IEA for 2025, the market perceives that higher production by OPEC+ and non-OPEC+ countries, coupled with a marked deceleration in demand growth, may be the origin of a perfect storm for prices. There are others, the few, who think they detect a strategy by the Arabs to help the American strategy of lower energy prices in the short term, but which would have the additional benefit of weakening "shale oil" in the medium term. Prevailing prices during recent months have already taken a toll on the production of less profitable crudes.

We have reservations about the formation of the supposed perfect storm. First, announcing global openings is one thing, and materializing the announced volumes sustainably is another. To begin with, as we mentioned last week, the 138,000 barrels per day announced by OPEC+ starting in early April became "salt and water," as the cartel closed the month with production 100,000 barrels per day below March.

Now, the 411,000 barrels per day (411 Mbpd) supposedly being opened since the beginning of May include validation of off-quota productions that Kazakhstan and Iraq were already doing, about 360,000 barrels per day, resulting in a net increase of only about 50,000 barrels per day; this without considering probable production losses from Mexico and Venezuela. OPEC+'s production increase announcement for June, another 411 Mbpd (Saudi Arabia 230 Mbpd, UAE 90 Mbpd, Kazakhstan 60 Mbpd, Libya 20 Mbpd, and Nigeria 11 Mbpd), still doesn't seem sufficient to cope with the demand growth projection for 2025, even considering the reduced growth levels projected by the IEA.

By the end of 2025, it would be necessary to incorporate the production increase of nearly 1.5 MMBPD from non-OPEC+ countries to complete the balance. These increases would come, according to reports from the International Energy Agency (IEA) and OPEC, from the US, Canada, Brazil, and Guyana, which would result in surplus supply, at least in IEA projections, justifying oil market pessimism. However, these projections need to be reconsidered in light of the lower price environment and the expectation that they will remain at those levels for the next 18 months, which will surely modify the growth outlook, especially in the unconventional crude basins.

It's not unthinkable to deduce that US and Canadian production will experience no growth at all, since the price environment doesn't justify development investments in "shale oil" and oil sands. As for Guyana, production will remain constant until the One Guyana FPSO (Floating Production Storage and Offloading) starts up at the end of this year.

Regarding Brazil, Petrobras started operating the FPSO Almirante Tamandaré on February 15, 2025, in the Búzios field, raising Brazil's production to three million six hundred thousand barrels daily (3.6 MMbpd). During the rest of the year, production will begin in two other units: the FPSO Alexandre de Gusmão in the Mero field, and P-78 in the Búzios field. An increase of 140,000 barrels per day is contemplated from these two units. So the incremental production from non-OPEC+ countries, which the IEA projects at one million three hundred thousand barrels per day (1.3 MMbpd) during 2025, would be closer to about 500,000 barrels per day, of which three hundred thousand correspond to the second half of 2025.

The US hydrocarbon industry is reviewing its financial discipline policy to incorporate new market trends. As a result, investment programs are being reduced. Prices projected by alarmists redefine the economic limits of marginal Shale Oil wells. This week, Baker Hughes reports a reduction of another 10 drilling rigs, the most significant weekly activity reduction in a long time. At the same time, the number of fracturing crews falls below 100 for the first time since the pandemic.

Some take this cyclical situation as evidence of what is called "Peak Shale," the beginning of the decline of the "shale oil and gas" revolution. However, there are advanced activities in shales at greater depths than those traditionally exploited in the Permian basin, such as the Woodford and Barnett horizons, where exploration is in its early stages but with very encouraging results; Exxon's XTO division (XOM) is very active in these developments. Advances in seismic (including AI) have allowed drilling bits to navigate these source rocks to build wells with horizontal sections of more than ten thousand feet (3 km), achieving recoveries of one and a half million barrels. A result that, if continued, could considerably extend the useful life of the Permian basin.

The following graph summarizes our estimates for the supply increase.

In our neighborhood, the situation of the Mexican state oil company, Pemex, continues to be concerning. According to its latest results, crude production continues declining, the company generates losses, and its debt keeps growing. Additionally, frequent accidents have generated concerns about the company's industrial safety standards and operations management.

Pemex has announced it plans to cut 3,000 jobs as part of a restructuring aimed at reducing expenses and increasing the exploration and production budget to compensate for the decline of its fields. In April 2025, crude production, including that of private partners, was one million three hundred seventy thousand barrels per day, almost 9% lower than last year. To reverse the production decline and improve financial performance, the company recently announced a plan to reactivate inactive wells with production potential. Pemex says it has around 4,500 wells in that category.

Brazil is reviewing its environmental approval processes to make them more agile, particularly for hydrocarbon activity. Evidence of this is that Petrobras finally received approval for the controversial environmental impact assessment in the Foz do Amazonas basin. Petrobras is preparing to begin offshore exploration of the Amazon delta, which could reverse the eventual decline of the Santos and Campos basins.

Geopolitics

President Donald Trump's government granted Syria a temporary exemption from the sanctions it is subject to. It lifted restrictions on American activity in that country, intending to end a long period of sanctions. This initiative is designed to give Syria's interim government a better chance of survival after more than a decade of civil war. The US administration did not specify the duration of the Congressional sanctions exemption, but the law limits any presidential forgiveness to six months.

Ayatollah Ali Khamenei, Iran's supreme leader, declared that he doesn't expect negotiations with the United States over Tehran's nuclear program to "reach a conclusion," because of the US's intransigent position. Khamenei called the American demand that Iran not enrich uranium a "grave error." 

According to Iranian sources, American negotiators have sent contradictory signals about whether they will allow Iran to enrich uranium domestically in a nuclear agreement. As tensions rise in meetings in Rome, regional instability could again push political risk. It should be noted that the US has threatened to attack Iran if it doesn't accept a nuclear agreement. However, Trump didn't explicitly rule out his right to enrich uranium when he reiterated that threat during his Middle East trip last week.

In Gaza, international relations are complicated as Israel carries out its plans to expel Hamas from the strip. The prolonged operation, the crisis of the displaced, and the lack of access to humanitarian aid are reinforcing international opposition against the Israeli campaign. The UN reports that humanitarian aid is beginning to flow to the most needy areas, although much slower than the emergency warrants.

The Houthi rebels, demonstrating they have combat capacity left or are receiving Iranian aid, have launched a large number of missiles and drones against Israel from Yemeni soil. Most have been intercepted, but some caused damage, specifically one that fell on Ben Gurion airport facilities.

Trump and Putin held a phone conversation, which Trump called "excellent" and Putin as "very significant and frank." However, the Kremlin refused to accept a ceasefire in the war with Ukraine, despite pressure from Washington and its European allies. On Friday night, as if to underscore its position, Russia carried out one of the largest missile and drone attacks against Kyiv. The chances of a ceasefire and lasting peace for this conflict are fading. The only positive outcome of recent talks has been a large-scale exchange of prisoners of war, which could reach up to 1,000 on each side.

For its part, China is making plans to leverage its economy and strengthen its dominance over strategic materials. In this regard, it has included in the government agenda a new artificial canal, 767 kilometers long, to connect the rare earth center of the interior, in Jiangxi province, with Zhejiang on the eastern coast. The canal would have the dual objective of reducing logistics costs and integrating less developed interior regions with richer coastal centers.

The dollar, the global economy's historical refuge, headed for its first drop in five weeks against major currencies, and long-term Treasury bond yields remained elevated, due to concern about US debt.

Price Dynamics

Oil prices fell on Friday for the fourth consecutive session, heading for their first drop in three weeks. OPEC+'s renewed announcement of higher production starting in July and deteriorating trade relations between the US and EU allies were the main catalysts. These two announcements truncated, mid-week, the gradual price recovery of the last twenty days. On Friday, prices had a "mini-rally," but it wasn't enough to avoid a loss of almost 1% compared to the previous week.

Thus, at market close on Friday, May 23, the Brent and WTI benchmark crudes were trading at $64.78/bbl and $61.53/bbl, respectively.

VENEZUELA

Maximum Pressure is Written with Crooked Letters

On the eve of regional elections, and perhaps affected by the failure of US special envoy Richard Grenell to neutralize the State Department, the regime intensified repression against its political adversaries to instill some interest in the agonizing regional elections. Opposition leader Juan Pablo Guanipa, an important ally of María Corina Machado, was just one of many detained and accused of forming a terrorist network to attack the May 25 elections. And as is customary, due legal process and detainees' rights have been trampled upon.

According to pollsters, only around 15% of those registered in the electoral roll would attend the May 25 elections, equivalent to the diminished hard base of the PSUV (government party) and the reduced groups that serve as opposition accepted by the regime. Meanwhile, the opposition, which has closed ranks with Edmundo González and María Corina Machado, has agreed not to participate in a process with even fewer guarantees than the one held on July 28, 2024.

As we approach May 27, the expiration date of OFAC Licenses, efforts to prevent the outcome intensified and produced what seemed like a diplomatic success for the revolution. Without warning, Bloomberg reported Richard Grenell's trip to the island of Antigua to negotiate with Venezuelan authorities the exchange of a former American military man, kidnapped in Venezuela, for the possibility of continuing negotiations by extending Chevron's license for an additional 60 days.

The Antigua episode showed that the Trump administration's policy toward Venezuela has two aspects: one of supposed pragmatism, defined somewhat murkily by its coincidence with oil lobbying, whose operator is envoy Richard Grenell; and the other of maximum pressure, aimed at achieving changes toward genuine democracy, whose standard-bearer is Secretary of State Marco Rubio, with support from Republican members of Congress from Florida.

As soon as Grenell's news broke, and after Trump's bill, the "Big Beautiful Bill," was approved in the lower house by the narrowest possible margin, Marco Rubio confirmed that the end date of the "wind down" period for Chevron's license was May 27, as contemplated. The sequence isn't a pure coincidence. This intricate two-time process, which guaranteed the White House the support of the Florida caucus, seems temporarily resolved in favor of the Secretary of State, but we believe we haven't seen the end of this story.

On Friday, oil services company Schlumberger (SLB) paralyzed its operations in the joint venture PetroIndependencia, citing the proximity of May 27. Other service companies are affected by SLB's decision, such as Venezuela's Ensing company, whose EDV-43 rig, which was carrying out completion work on wells drilled during 2024, has been forced to stop its activities.

In that regard, on Saturday, Bloomberg indicated that the State and Treasury Departments are preparing a license (type LG 8), allowing Chevron to maintain limited activity in the country to maintain its assets and guarantee their security. However, there has been no indication from the involved Departments that this is happening.

The shortage of foreign currency and the Maduro administration's decision to dedicate incremental public spending to the May 25 elections have increased monetary financing, printing of inorganic money, and as a consequence of a high injection of dollars into the exchange market, the Bolívar in the official market slipped to 95.08 Bs./US$, barely 0.3% compared to the previous week, which is why the gap with the parallel market shot up to 40%—reviving the ghosts of past hyperinflation.

At the close of this note, as voting time was approaching, it became evident that attendance wouldn't even reach the qualifying level of meager. Since morning, empty streets and electoral centers have been observed. We only need to see what type of announcement the CNE will present at the stroke of midnight.

Oil Operations

As we mentioned in the previous section, oil service companies have begun reducing their activities in preparation for the curtain falling next Tuesday; mechanical and energetic decline, although low, command production activity onwards. Diluent inventories are at high levels, allowing dilution and mixing operations to be maintained for at least two months.

Crude production during the last week averaged eight hundred fifty-one thousand barrels per day (851 Mbpd), distributed geographically as follows:

  Area                         Mbpd 

• West                          212 

• East                           124 

• Orinoco Belt             515

 • TOTAL                   851

National refineries processed 224 Mbpd of crude and intermediate products. Cardón's catalytic cracking unit (FCC) continues to operate. Gasoline production was 86 Mbpd and diesel 72 Mbpd.

Crude oil exports are projected for May at 580 Mbpd, mainly destined for the Far East, China directly and via Malaysia. Tankers going directly to China probably use "spoofing" (identity impersonation) and origin falsification to reduce the risk of secondary sanctions or tariffs.

Five tankers, chartered by "traders," presumably a Vitol subsidiary, were responsible for bringing diluent and products in exchange for crude that was sent to the US. A total of 90 Mbpd had that destination.

In the petrochemical sector, methanol plants operate at almost 90%, while Fertinitro plants in José are out of service for maintenance and natural gas restrictions.

OIL CONTINUES TO NAVIGATE GLOBAL OPTIMISM

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA

 

Donald Trump was elected on a platform that some consider isolationist, not only commercially but also geopolitically, at least in rhetoric. Trump's first trip abroad, which occurred this week, is framed within his unorthodox vision of foreign policy. Far from visiting the traditional destinations of European capitals or power centers in Russia and China, the U.S. president chose as his destination the leading oil-producing countries of the Middle East, all governed by family monarchies: Saudi Arabia, the United Arab Emirates (UAE), and Qatar.

Beyond the commercial achievements for American companies like Boeing and the trillion-dollar investment commitments made by the visited countries, the tour of the Gulf countries had a significant geopolitical impact. Surprisingly, Trump announced that his government is close to reaching an agreement with Iran on its nuclear program. The goal, he said, is to avoid a direct military confrontation with Iran. However, the impact of this news was mitigated when Tehran clarified that there were still many gaps to be closed before an agreement could be reached. No less surprising was the shift in U.S. policy regarding the new Syrian regime.

Another high-caliber event, although it only tangentially affects the hydrocarbon business, is Moody's Ratings' decision to downgrade the U.S. government's debt risk rating from Aaa to Aa1, citing the failure of successive governments to halt debt growth. The credit rating downgrade and the Federal Reserve's (FED) decision not to lower interest rates represent a significant obstacle to President Trump's plans to tame government debt growth.

In any case, the oil market placed significantly greater value on the direction that tariff negotiations between the U.S. and China have taken, reinforcing the optimism that had emerged in response to the favorable behavior of oil market fundamentals.

Fundamentals

Once again, the supply and demand balances published by OPEC and the International Energy Agency (IEA) differ and even diverge in their projections for the short term, such as oil supply and demand for the current year. While OPEC maintains its projection of demand growth at 1.3 million barrels per day (1.3 MMbpd) for 2025, the IEA reduces it to 740,000 barrels per day (740 Kbpd). By the end of May, we estimate that global demand is already at 104.2 MMbpd, 0.5 MMbpd higher than at the end of 2024.

On the supply side, the IEA forecasts growth of 1.6 MMbpd, assigning 1.3 MMbpd to non-OPEC+ countries and 0.3 MMbpd to countries included in OPEC+. Meanwhile, OPEC's forecasts indicate supply growth from non-OPEC+ countries of 800 Kbpd "driven by the U.S., Brazil, Canada, and Argentina, and mitigated by a decline in Angola," which, complemented by the volumes announced to be unlocked in OPEC+ countries, 822 Kbpd, would bring the supply increase for 2025 to 1.6 MMbpd. Half of the 822 Kbpd to be "unlocked" corresponds to volumes already being produced by countries that have consistently produced more than their quota.

OPEC's secondary sources confirmed that the combined production of OPEC+ countries in April was about 100 Kbpd lower than in March, even though, according to announcements, 138 Kbpd of shut-in production would be released in April. The programmed increase for May was 411 Kbpd; however, despite not having official figures, preliminary analyses cast doubt on the materialization of an increase of that magnitude. We estimate that OPEC+ production could increase by 250,000 barrels per day (bpd) in May, with the majority of the increase coming from Saudi Arabia and the UAE.

Although the U.S. appears as one of the contributors to the increase in global supply in the projections of both institutions, drilling activity and the number of hydraulic fracturing crews continue to decline. This suggests that, apart from some incremental barrels of natural gas liquids, production remains on a plateau with a tendency to decline slightly. The Energy Information Administration (EIA) in its weekly report showed that commercial crude inventories in the U.S. grew by around 3.4 MMbpd.

Meanwhile, China showed a rebound in economic growth and oil demand, which was interpreted as an increase in productive and export activity, anticipating the scheduled tariff increase between the two countries; however, the high purchases of Russian crude scheduled for May by Sinopec could indicate real growth in Chinese demand. In India, oil demand is estimated to grow by 3.4% in 2025, on its way to reaching 6.0 million barrels per day (MMbpd) in 2026.

This entire picture of supply and demand fundamentals is what keeps global crude inventories below the averages of the last 5 years.

Geopolitics

In Switzerland, the United States, and China announced that they had reached an agreement to temporarily reduce the tariffs on imports that they had previously announced. The escalation in the trade war between the two countries was having a profound impact on the economy. Still, now both have declared a truce that could mark the beginning of a new commercial balance. The trade representative, Jamieson Greer, said that the United States agreed to lower the 145% tax that Trump imposed last month to 30%. China agreed to reduce its tariff rate on U.S. goods from 125% to 10%.

During the week, on May 13, President Trump embarked on his first foreign policy trip to the Middle East with his extensive team and press; a group of top executives representing the most powerful American companies also attended the meetings. The mission had three stops: Saudi Arabia, the United Arab Emirates (UAE), and Qatar. In each of these countries, they were received with a great display of luxury and the unique version of diplomacy of the Persian Gulf countries. A trip that, in one way or another, could represent billions of dollars in investments and significant commercial agreements for the Trump administration.

Beyond the choice of destination for his first trip, countries of economic and energy relevance beyond that region, the most outstanding aspect of the tour, from a geopolitical angle, turned out to be a crucial shift in U.S. foreign policy towards Syria: the lifting of all U.S. sanctions on the Damascus regime, a watershed event for a country with more than ten years of conflict and decades of international isolation. Additionally, in Saudi Arabia, he met with the de facto Syrian president, Ahmed al-Sharaa, the first meeting of a U.S. president with a Syrian leader since Bill Clinton, in March 2000, tried to convince then-Syrian president Hafez al-Assad to sit down to negotiate a peace agreement with Israel.

This is an important change by Washington regarding the man who, at the head of Hayat Tahrir al-Sham, a group linked to Al Qaeda and designated as a terrorist organization by the U.S., led the fall of Bashar al-Assad; an example of how geopolitics can give or foster extraordinary turns in short periods. In explaining his motives, Trump emphasized that the relief of sanctions seeks to encourage Syria once again to normalize relations with Israel. He also mentioned the need for Al-Sharaa to expel foreign militant groups, deport radical Palestinian groups, and help keep ISIS under control.

From Doha, Trump opened the possibility of visiting Turkey if what could be the first direct talks between Russia and Ukraine to reach a truce in their already long conflict materialized. In fact, the possibility of direct contact between Putin and Zelensky was initially presented and validated by Putin. However, President Putin, in a display of his customary erratic behavior, decided not to attend and sent a delegation that fell short of meeting expectations. In any case, the meeting in Istanbul was the first time that the parties in the conflict faced each other. Although the meeting was disappointing, the parties at least agreed to exchange about a thousand prisoners of war, but did not achieve any other progress during these first direct peace talks since 2022. Ukraine, under pressure from Trump, had requested a 30-day ceasefire, and Moscow rejected it, sticking to its maximalist demands, unacceptable to the Ukrainian side.

The talks in Istanbul lasted less than two hours. Kyiv wants the West to impose stricter sanctions unless Moscow accepts Trump's proposal for a 30-day ceasefire. As soon as the talks ended, Ukrainian President Volodymyr Zelensky had a telephone conversation with Trump and the leaders of France, Germany, and Poland, his spokesperson said.

Israel, the most significant U.S. ally in the region, was left out of this trip, and Trump's pronouncements on hostilities in the Gaza Strip were brief and short, and he only referred to them when questioned by the press. At the last press conference, when asked about the intensification of Israeli attacks in Gaza, he responded that "many good things are going to happen over the next month, and we are going to have to help the Palestinians too. Many people are starving in Gaza. We have to look at both sides, but we will do a good job." We imagine that one of the objectives of the trip was to seek windows of opportunity for greater stability in the region.

In Asia, India and Pakistan agreed to a ceasefire in their exchange of missile and drone bombardments, following a jihadist attack that killed 26 tourists from India in the Kashmir area under New Delhi's control. Islamabad never accepted responsibility. However, the conflict may not be fully resolved, as India is considering drastically increasing the water it extracts from the Chenab, Jhelum, and Indus rivers, which supply Pakistani farms downstream, as a form of retaliation.

Price Dynamics

President Trump's Middle Eastern tour had an impact on the oil market. The announcement of a possible agreement with Iran, the lifting of sanctions that weighed on Syria, and the cooperative atmosphere of the visited countries left an environment of reduced conflicts, and therefore of lower geopolitical risk. Similarly, the start of direct talks between Ukraine and Russia also allowed a cautious hope to germinate regarding the beginning of the end of the war. However, the market's reaction to the preliminary agreement between the U.S. and China was the most significant catalyst for the market to reduce its fear of structural demand erosion, translating into optimism and rising oil prices.

Thus, in a week of volatility, at the close of the markets on Friday, May 16, the Brent and WTI benchmark crudes were quoted at $65.41/bbl and $62.49/bbl, respectively, a gain of 2% compared to the previous week.

VENEZUELA

The circle tightens, and options are few.

The country continues on a path of economic decline, with an increasingly impoverished population and increasingly authoritarian control. The inevitable, for now, decline in oil revenues marks an economic recession and out-of-control inflation.

The Maduro administration perceives that the only realistic lifeline is to try to reverse, totally or partially, the maximum pressure policy of the Trump administration. The emergency trip to China by Vice President and Oil Minister Delcy Rodríguez does not seem to have had effects beyond cooperation agreements and, perhaps, greater purchase of Venezuelan crude or volumes rebaptized as Malaysian or Brazilian. These imports will have to comply with debt service payments to China and compete with Iranian and Russian crudes in terms of prices and refinery yields. On the other hand, Russia is not in a position to become Venezuela's white knight when it is itself burdened by the cost of the war with Ukraine and is trying to have an approach to the U.S. administration.

Venezuelan authorities, particularly Jorge Rodríguez, the current president of the National Assembly, perceive a crack that could lead to some results, based on the influence over President Trump of his special envoy, Richard Grenell, and his well-oiled lobbying machinery that includes powerful oil interests. They seek to at least maintain the presence of international operators, even if only as passive minority partners in joint ventures, without the operational rights given to them by the agreements protected by the Anti-Blockade Law, as licensed by OFAC. The destination of the crude oil from these companies would be the most difficult variable to solve.

This alternative would prevent an exodus of foreign companies from Venezuela. Still, it could lead to PDVSA accumulating new debt and owing more dividends to companies, since it plans to take charge of operations previously controlled by joint ventures and handle exports by itself. Lawyers and experts have pointed out that greater clarity is needed as to how to complete the closure of these activities. Meanwhile, PDVSA has only delivered oil to customers who prepay or accept barter, and in April, it canceled several crude shipments to Chevron due to uncertainty about payments. There are only 9 days left to achieve its purpose, as on May 27, all OFAC licenses cease, and the discretionary system of secondary tariffs under Marco Rubio's command begins to function.

The case is that contacts between Miraflores and the White House continue, as evidenced by some facts related to illegal immigration cases. On one hand, the return to Caracas of Maikelys Antonella Espinoza Bernal, a 2-year-old Venezuelan girl separated from her parents due to U.S. deportation policies, was used by Maduro as a propaganda tool, and he thanked Richard Grenell and President Trump for their efforts. On the other hand, Marco Rubio, the Secretary of State, hinted, in response to a request from Maduro, that if Venezuela was willing to receive Venezuelan prisoners sent to El Salvador, there was a possibility that the transfer would be authorized.

Related to the handling of illegal Venezuelan immigrants, the U.S. Supreme Court ruled in favor of an appeal filed by a group of Venezuelan migrants who asked the high court to stop their deportation under the Alien Enemies Act. The ruling, similar to others it has issued in the past on the same subject, revolves around the fact that the alleged illegal immigrants did not have sufficient time to present a reasonable legal challenge to their deportations. The court did not rule on the legality of the AEA (Alien Enemies Act), but sent the matter back to the Fifth Circuit Court of Appeals, based in New Orleans, to give effect to its decision, recognizing that detainees are entitled to greater notice than they were given.

While these signals of a presumed negotiation are taking place, the effects of the "wind down" period, or termination of OFAC licenses, are taking a toll on the economy, which is in a vicious circle where mitigating monetary measures adversely affect the exchange market, which in turn pushes inflation upward. Public spending increased in April to finance bonuses for workers announced on May 1 and some extraordinary expenses related to the May 25 elections. Higher public spending, accompanied by lower tax collection in an environment of foreign currency scarcity, has forced the BCV to resort to inorganic monetary financing. The depreciation of the monetary sign, the Bolivar, has intensified. The official exchange rate rose this week to 94.8 bolivars per dollar, and the gap with the parallel market has widened to 26%.

Another element that caused concern to Venezuelan authorities was that Nicolás Maduro was unable to contact President Lula during their stay in Moscow. Even more telling, Maduro was absent from the IV Ministerial Meeting between the Community of Latin American and Caribbean States (CELAC) and the Chinese government, which was held with many heads of state, such as the President of Brazil, Luiz Inácio Lula da Silva, Gabriel Boric of Chile, and Gustavo Petro of Colombia. The dialogue of that meeting revolved "around the future of relations between the Latin American bloc and the Asian giant."

President Xi Jinping announced that China will offer credit lines of nearly $10 billion to Latin American countries to support their development, in addition to visa exemption for several Latin American countries. In said meeting between CELAC and the Chinese government, Xi Jinping did not mention Venezuela when referring to cooperation between China and Latin America and the Caribbean.

Oil Operations

Activities in the hydrocarbon sector have been adapting to the conditions imposed by the cancellation of OFAC licenses, including those of foreign oil services companies, following the expiration of General License 8.

Crude production during the last week averaged eight hundred and fifty-eight thousand barrels per day (858 Kbpd), geographically distributed as follows:

Area                            Kbpd

• West                         214

• East                          125

• Orinoco Belt             519

• TOTAL                      858

National refineries processed 226 Kbpd of crude and intermediate products. Cardón's fluid catalytic cracking unit (FCC) continues in operation at 38% of its capacity. Gasoline production was 87 Kbpd and 74 Kbpd of diesel.

Exports are primarily destined for the Far East, except for crude shipments through "traders" and in the form of barter to increase diluent inventories to handle Orinoco Belt crude blends after May 27. Approximately 60,000 barrels per day (bpd) of crude oil are being stored in tankers, and it is contemplated to use shipments to Cuba as eventual relief to the limited storage capacity and to avoid having to affect production due to volatility. It is estimated that May exports will be below 600 Kbpd; to date, about 10 MMbbls (580 Kbpd) have already been dispatched.

[1] International Analyst

[2] Nonresident Fellow, Baker Institute

THE MARKET SEEKS FOR A NEW PERSPECTIVE

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA

Throughout most of 2025, oil market analysis has been shaped by a long-term perspective colored by widespread pessimism about the economy as a whole. On the other hand, immediate elements, such as fundamentals based on verifiable physical data, appear less focused and with less weight in the market. This perspective of the distant, centered on possible apocalyptic scenarios, has caused a significant drop in crude oil prices, falling to levels not seen since the pandemic in early 2021. In the first four months of the year, a 17% decrease was recorded.

This sort of market Hypermetropia, focusing on the distant and neglecting the near, has begun to show symptoms of correction, and the signals implicit in the reduction of inventories in recession and a demand that grows without pause are becoming clearer. This new perspective has also been supported by some positive news emerging from the commercial labyrinth created by President Trump's tariff threats. News of negotiations with the United Kingdom, and expectations derived from the initial positioning of the U.S. and China in their task of agreeing on a mutually beneficial trade policy, are considered positive. In the short term, these news items leverage the rise in oil prices; the oil price recovered a small part of the value lost so far this year, 4.5% in the week.

Fundamentals

OPEC oil production fell slightly in April, despite the entry into force of a scheduled increase in pumping. According to a Reuters report, OPEC countries pumped 26.60 million barrels per day in April, a reduction of thirty thousand barrels per day, compared to March. The U.S. sanctions pressure to enforce oil sanctions imposed on Venezuela and Iran, and lower production in some countries (Iraq and Libya) from OPEC's secondary sources, negatively impacted the reported production figures. The OPEC+ figures, although not based on official information, also show a discrete lag, except for Kazakhstan, where an additional increase in production is observed, approaching one million nine hundred thousand barrels per day - see the graph below.

Source: OPEC Secondary Sources

Meanwhile, in the U.S., production continues its slow decline, which we estimate at 3% annually —a trend projected based on drilling activity levels and the number of fracturing crews. Baker Hughes reports that in the week, another 6 rigs were taken out of service, both on land and offshore. Based on field data, we estimate that the number of fracturing jobs was reduced by 8% over the last 30 days. The Energy Information Administration (EIA) reported a reduction in U.S. commercial crude inventories of two million barrels, a significant decrease considering that oil imports were almost four million barrels higher than the previous week. The Federal Reserve (FED) decided not to modify interest rates. Although some analysts considered that conditions existed to do so, the FED argues that inflationary threats persist. The Trump administration will surely interpret this decision as contrary to its interests and will increase tensions with Jerome Powell, the head of the agency.

China continued its program of purchasing Russian, Iranian, and Venezuelan crude oil despite U.S. pressure, which resulted in the sanctioning of another Chinese refinery. The Asian giant is expected to report economic results for next week. Credit growth has improved this year, but April figures are unlikely to reflect results from the latest People's Bank of China measures to ease monetary policy.

Geopolitics

The most recent war focus seems to have been calmed, for now. India and Pakistan agreed on Saturday to a ceasefire after talks promoted by the U.S. to end the most serious military confrontation in decades between these historic rivals, a very delicate confrontation given that both possess nuclear weapons. The ceasefire agreement comes after several weeks of clashes, triggered by a massacre of tourists last month, for which India holds Pakistan responsible, which denies the accusation. The truth is that on the same day, there were violations of the negotiated ceasefire, and we cannot expect a quick solution to this recurrent conflict.

Russia commemorated on Friday the 80th anniversary of the Soviet Union's victory over Nazi Germany in World War II. The military parade proceeded normally despite a series of Ukrainian drones launched against Russian airports, causing flight rescheduling and temporary closures of facilities.

President Vladimir Putin, the Kremlin chief with the most years of service since Joseph Stalin, was alongside China's Xi Jinping and several dozen other world leaders and Russian veterans in a covered grandstand next to Lenin's mausoleum, as Russian troops marched. Meanwhile, Russia launched a ballistic missile and a barrage of drones against the Ukrainian capital. On Saturday, after the celebrations, the Kremlin accused European countries of making contradictory and conflicting statements, after European leaders backed a U.S. plan for a 30-day ceasefire in Ukraine and threatened Russia with "massive" sanctions if it did not sign it or did not comply.

In the Middle East, Lebanon and Syria are taking drastic measures against Palestinian factions that for decades have had an armed presence in both countries and that, on some occasions, were used to plan and launch attacks against Israel. This crackdown comes as Syria's new rulers, under the Islamist group Hayat Tahrir al-Sham, persecute officials from the previous government of Bashar al-Assad. Syria's most prominent Palestinian factions were key allies of the Assad dynasty, both in times of war and peace, and cooperated closely on security matters. It also comes after Iran's main regional ally, the Lebanese militant group Hezbollah, was weakened after more than a year of war with Israel, and as the new Lebanese government promises to restore control over all weapons in its territory, including those of Hezbollah and other Palestinian factions in Lebanon.

On Wednesday, Syrian President Ahmad al-Sharaa declared that his government is holding indirect talks with Israel through mediators. He added that these indirect negotiations aim to ease tensions between the two countries following intense Israeli airstrikes against Syria. Israel is likely to welcome the new policy of controlling hardline Palestinian factions, including Palestinian Islamic Jihad, which participated alongside Hamas in the October 7, 2023, attacks in Gaza.

Israel's military attacked Houthi rebels in Yemen's Hodeida province on Monday with a series of air raids. The attacks came a day after the Iran-backed rebels launched a missile that hit near Israel's main airport. The rebels' press office reported that at least six strikes hit the crucial port of Hodeida on Monday afternoon. Other attacks hit a cement factory in the Bajil district, located 55 kilometers northeast of Hodeida city.

In summary, it has been a week of discrete yet positive steps toward conflict resolution, although it is merely a glimmer of hope at the end of the tunnel. As such, it did not affect the levels of geopolitical risk that the oil market factors in. The election of an American as POPE Leo XIV could introduce new dynamics in geopolitics, although it is too early to speculate.

Price Dynamics

Crude prices rose this week following the announcement of a trade agreement between the U.S. and the United Kingdom and on hopes that an agreement could be reached with China. In any case, the fundamentals —inventory, demand, and supply — provided a solid foundation for this partial recovery. Indeed, Brent crude prices in the international oil market approached $64/bbl and WTI prices surpassed $61/bbl, representing an increase of around 4.5% compared to the previous week.

Energy Transition and Trade War

In the past, we have written about the importance of geopolitics in materials for the energy transition, a topic that takes center stage in the trade war scenario the world is in. China is the world's leading supplier of "rare earths," and given their importance, it has already begun to limit their global trade. In the same vein, the recently signed agreement between the U.S. and Ukraine, for the joint exploitation of mineral resources, has as one of its key points the mining of "rare earths," which have undoubtedly become a set of strategic materials that drive new geopolitical tactics.

Another element that raises a red flag of potential scarcity and, therefore, affects the energy transition, is copper. Copper is key to essential industries of the future, such as the development of renewables, increased electrical demand for artificial intelligence, the manufacture of electric vehicles, and the push for larger and more sophisticated transmission networks. Approximately 50% of the world's copper reserves are concentrated in five countries: Chile, Australia, Peru, the Democratic Republic of the Congo, and Russia, the latter two of which are involved in ongoing armed conflicts.

The recent escalation of tariffs could become a significant obstacle to the growth of copper production, processing, recycling, and manufacturing, from its production in mines to its use in final products. Not to mention the problem of obtaining permits to mine copper increasingly deeper and with less content.

Studies indicate that, despite copper being produced in several countries that sell their raw material, China overwhelmingly dominates the refining of this metal. It is in this phase that the actual added value of the sector is centered. China imports 60% of the world's copper ore to produce 45% of the world's refined copper material. China holds all these cards up its sleeve when negotiating agreements with belligerent trading partners, such as the U.S.

VENEZUELA

Last-minute Lobbying

OFAC's General License No. 8, which regulated the operations of U.S. oil service companies in Venezuela, expired on May 9, just weeks before the conclusion of oil operations covered by General License 41, among others, on May 27.

In this complicated scenario for the Venezuelan regime, it has activated all its lobbying tools, including some analysts and commentators. The television appearances of Chevron's CEO, tweets from Richard Grenell (White House advisor) and Linda Loomer (influencer associated with Trump), and retweets by professionals dedicated to this work, united by the narrative of the danger of leaving vacant the oil spaces currently in the hands of Western companies and allowing Chinese and Russian interests to come in, have raised the volume of their campaign. The campaign of these actors is of such magnitude that the Secretary of Energy and representatives of the State Department have had to come out to reaffirm that the current policies regarding the cancellation of licenses and other complementary policies continue in effect. Added to all this, flights of deported Venezuelans continue to arrive in the country. 

On the domestic policy front, Tuesday dawned with the surprising announcement by the U.S. Secretary of State, Marco Rubio, informing that the five opposition people detained at the Argentine embassy for more than 400 days had been "successfully extracted" and were in U.S. territory. The following day, regime officials attempted to downplay the significance of the event, suggesting that it was the result of a negotiation. Representatives from the U.S., Argentina, and Brazil denied that negotiations had taken place. Nicolás Maduro was out of the country during the release of these hostages, attending the celebration of the 80th anniversary of the Soviet victory over Nazi Germany. The regime gave wide coverage to the visit to Moscow, trying to mitigate the propaganda effect of the release. Still, Minister Cabello's attempts to explain the event had the opposite effect.

The general elections, scheduled for May 25, remain on course; even this weekend, the CNE was inviting voters to participate in an electoral simulation. Curiously, the economic issue, which is the central problem of the regime, passes under the table in an electoral process that focuses on speeches with little content on the issues that affect the electorate. The Central Bank of Venezuela (BCV) is intervening in the foreign exchange market with a greater volume of foreign currency, aiming to narrow the gap between the official and parallel rates. The official rate has skyrocketed to more than 93 Bs/$, a devaluation so far this year of more than 70%, while the gap resists falling below 23%.

The vertiginous increase in inflation is the direct result of this economic scenario generated by the scarcity of foreign currency. This situation will worsen if, as expected, on May 27 the operational contributions of international private companies in oil activity conclude (see Graph below).

Oil Operations

Activities in the hydrocarbon sector have experienced fluctuations over the last week. But it is exportation that is undergoing the most significant transformation in the face of the expiration of OFAC licenses.

Crude production during the last week averaged eight hundred and sixty thousand barrels per day (860 Mbpd), geographically distributed as follows:

            AREA                         Mbpd

            • West                         215

            • East                          125

            • Orinoco Belt            520

            • TOTAL                   860

National refineries processed 220 thousand barrels per day (200 Mbpd) of crude and intermediate products. The FCC unit at Cardón was started after a prolonged maintenance period and is operating at less than half its design capacity. Gasoline production was 83 Mbpd, and diesel was 73 Mbpd. In what appears to be an attempt to reinforce the narrative that Chinese companies would take control of the oil industry, rumors were spread about Chinese companies preparing to take over refinery operations in Paraguaná.

The number of tankers at Venezuelan terminals has been reduced to nearly a third of last month's peak. However, in Lake Maracaibo, up to 6 tankers were being used as cabotage to transfer crude to larger tankers on the high seas. It is still early to estimate crude exports for May, but it could be in the order of 500 Mbpd.

[1] International Analyst

[2] Nonresident Fellow, Baker Institute

 

TRADE WAR AND OPEC+ DECISIONS PULL THE RUG OUT FROM UNDER THE MARKET

El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA

With barely less than 7% of the presidential term elapsed, the Trump administration has shaken up more issues than most other presidents in their entire term. The White House has declared war on world trade, aiming to reverse the U.S. trade deficit. It has launched a domestic campaign to try to dismantle what it defines as "Deep State" structures. It has actively involved itself, with mixed results, in Middle East conflicts and the Russia-Ukraine war. Likewise, it is confronting the problem of illegal immigration, inefficiency, and federal government bureaucracy. Not to mention its strategy of promoting an energy policy based on low-priced fossil fuels. With such an agenda, which we only summarize here, it is not surprising that not everything is going as the White House tenant imagined, which, added to his controversial style, has caused a significant drop in approval ratings for his administration. However, some pieces of the puzzle are starting to fall into place.

• Wall Street extended its gains for the ninth consecutive day, marking its longest winning streak since 2004 and recovering some ground lost since President Donald Trump intensified his trade war in early April. The S&P 500 rose 1.5%. For the week, the Dow Jones Industrial Average advanced 1.4%, and the Nasdaq Composite rose 1.5%, although the indices are still below what they achieved at the beginning of the year.
• Total non-farm payroll employment in the U.S. increased by 177,000 in April, and the unemployment rate remained at 4.2%, which was better than expected.
• China exempted ethane from the U.S. from applying the 125% tariff, and there are indications of bilateral interest in negotiating the rest of the trade relations.
• Despite Putin proving to be more complex than Trump imagined, the signing of resource exploitation agreements with Ukraine and Russian budgetary problems indicate that it is still possible, if not an end to the war, at least an armistice, in a reasonable timeframe.
• The determined support for Israel, nuclear negotiations with Iran, the reinforcement of sanctions against Iranian exports, confrontation against the Houthis, and rapprochement with Saudi Arabia are evidence of a reordering that could pacify the region. Although it is also true that no solution is in sight for the Palestinian population problem, and their desire for political and territorial sovereignty.
• Finally, by design or coincidence, oil prices continue to fall, which has prevented the tariff war from directly affecting inflation. This has allowed bilateral agreements to be reached, enabling trade to flow again with fewer setbacks.

Despite the above, the world in general, and the oil market in particular, perceives disorder and uncertainty, and that confrontations are leading the economy into a global recession, which would materialize in energy markets as a reduction in demand. This conviction led oil futures to fall during the last week to levels not seen since February 2021.

The attitude of OPEC+, pointing to an increase in crude supply for May and June greater than planned, does not bode well for the oil market. However, the possibility that the producing countries cannot increase the announced 1.0 MMbpd in the next three months should not be ruled out.

Fundamentals

The oil market, already intoxicated by excess news and apocalyptic predictions that have led to falling crude prices, must now face the decisions that resulted from the OPEC+ meeting this weekend. The cartel, unexpectedly, has announced the continuation of its strategy, promoted by Saudi Arabia, of accelerated production opening (+411,000 barrels per day for June), despite what we assume is the opposition of countries that cannot increase their production, and those whose economies depend heavily on oil prices. Saudi Arabia is signaling to allies and industry experts that the kingdom is not willing to prop up the oil market with more supply cuts and that it can handle a prolonged period of low prices.

This change in Saudi policy suggests a move towards regaining market share, a significant change after five years dedicated to balancing the market and defending prices, through a deep reduction in its production as the leader of the OPEC+ group of oil producers. The change seems too significant to be only a punishment for OPEC+ members who exceed their quotas. Saudi Arabia seems convinced that returning to the pre-pandemic situation, when it was in a price war with Russia, is its best option, believing that they are better equipped from the point of view of production costs and financial resilience.

One could postulate that a price war seeks to remove the least economical production from the market, a strategy that the Saudis have used in the past, not always successfully. Likewise, it is not far-fetched to think that this plays into the Trump strategy, since the strong sanctions and secondary tariffs against Iranian and Venezuelan crude could be compensated by the only country that may have idle capacity to open in the coming months, and not excessively damage the economies of North American shale oil, which is on a plateau.

Meanwhile, drops in exports from countries such as Nigeria, Iran, Mexico, and Venezuela would also mesh with the Saudi plan to reconquer markets, and would involuntarily be in line with Trump's low-price strategy. Trump will visit Saudi Arabia in May and could offer Riyadh a weapons package and a nuclear deal, who knows if the concept of bilateral energy domination will be on the agenda?

On the other hand, after taking a tough position in the face of Trump's tariff threats, China indicated that it is evaluating a proposal from the Trump administration to negotiate tariffs, which would lower the levels of friction between the two powers. Japan and Korea would call for a review of all tariffs, including spare parts and auto parts.

In the U.S., production and oil activity remain stable and depend on price movements, which have been eroding companies' cash flows. According to the weekly EIA report, commercial crude inventories showed a slight reduction of about 2.7 million barrels, while gasoline inventory was reduced by 4 million barrels, despite increases in refining runs.

The Trump administration proposed cutting the federal budget by $163 billion this Friday, increasing the amounts allocated to defense and border security, and reducing education, health, and social security items. The proposal would considerably cut renewable energy projects, climate change, and electric vehicle chargers. It would allocate Department of Energy funds to technologies oriented towards gas, coal, minerals, and nuclear reactors. This is a small step in the objective of reducing debt, and it will affect social, environmental, and energy policies.

Geopolitics

Regarding the geopolitical situation, the week brought old and new tensions. A new focus of dangerous frictions emerged this week between two neighboring nuclear powers, India and Pakistan. In the Kashmir region, controlled by India, 26 civilians, mainly tourists from India, were brutally murdered by Islamic terrorists, allegedly based in Pakistan. Indian Prime Minister Narendra Modi warned that his country "will punish all terrorists and those who support them." The message was directed at neighboring Pakistan, which India accused from the beginning of being behind the deadliest attack in the region since a suicide attack against paramilitary forces in 2019. Islamabad denied any connection to the massacre. Since the attack, threats of a new armed confrontation between Indians and Pakistanis have been increasing. Pakistani authorities claim to have information about an imminent Indian military attack.

Regarding tensions in the Middle East, nuclear talks between the U.S. and Iran have reached a stalemate, but there has been no official information from either party. In any case, the U.S. warned Iran to refrain from militarily supporting the Houthis in Yemen and established secondary tariffs on buyers of crude and products exported by Iran.

War skirmishes in the region increased in intensity. The Israel Defense Forces (IDF) reported that they bombed a military site, anti-aircraft guns, and land-to-air missile infrastructure in Syria, in a recent operation that is framed in the context of growing tension on this new front. In a brief statement, the IDF noted that they "will continue to act as necessary to protect the citizens of the State of Israel," without specifying the exact location of the targets hit or additional details about the motivation, date, or duration of the attack. This series of attacks occurred on the same day that Israel bombed positions near the presidential palace in Damascus, an action that Syrian authorities described as "a serious escalation against State institutions and their sovereignty."

On the Russian-Ukrainian front, things are not clear either. The meetings seeking peace have moved to various historic sites: an ornate Kremlin hall, St. Peter's Basilica, and a controversial session in the White House Oval Office. What has emerged so far from the Trump-led effort to end the war suggests a deal that is likely to be favorable to Russia. President Donald Trump has harshly reprimanded Ukrainian President Volodymyr Zelensky, indicating to him that Kyiv would have to cede territory and renounce its NATO membership.

On Wednesday, Washington and Kyiv signed an agreement that gives the U.S. access to Ukraine's mineral resources. This could allow continued military aid and fund the reconstruction of a country with enormous destruction. Among these mineral resources are rare earths, an important element in negotiations with China. Trump recently approved funds for the training and maintenance of F-16 fighter jets in Ukraine.

The agreement will demonstrate to "Russian leaders that there is no distance between the Ukrainian people and the American people, between our objectives," said U.S. Treasury Secretary Scott Bessent, after the signing. The Ukrainian parliament must decide on the approval of the agreement on May 8 of this year. Putin might be thinking of modulating his intransigence, pressured by the U.S. and the tripling of his budget deficit, the fall in oil prices, and the effects on his energy infrastructure.

Price Dynamics

Oil prices have shown a downward trend during the last week, guided by uncertainty about supply and demand. Brent crude has fallen 8.3%, at $61.29/bbl, while W

TI crude has dropped 7.6%, reaching $58.29/bbl, at the close of markets on Friday, May 2, 2025.

Note: At the beginning of the new week (May 5), prices continue to fall due to the OPEC+ decision.

VENEZUELA

The absence begins to be felt

The early cancellation of Chevron shipments to the U.S. market evidenced the importance that the licensed activities of that oil company had for the economy: support for the foreign exchange market, sustaining oil prices perceived by the State, and as leverage for oil exports. All these elements are beginning to kick in now, even though Chevron's absence was already effective in April.

In a display of economic fiction, the Central Bank of Venezuela (BCV) announced that the national economy registered a growth of 9.13% in the first quarter, trying to camouflage what is clearly an impending recession. The Venezuelan Finance Observatory had already reported a decrease of 2.7% for the same period.

The lack of sufficient foreign currency in the exchange market accelerated the BCV's devaluation, which took the dollar price to Bs 86.64. This is an increase of around 60% this year and maintains a wide gap of 23% with the so-called "war" dollar, which private actors are forced to resort to to finance imports.

Despite all direct indications from the Trump administration that we are in a scenario of maximum pressure, Maduro still seems to harbor hope that conversations and lobbying will achieve some agreement to mitigate the effect of maximum pressure. As we mentioned in previous weeks, it is evident that some political contact exists, and the week-to-week coordination of repatriated Venezuelan flights to the country reinforces that notion—this Friday, two flights arrived, one direct from Texas and the other via Honduras.

It is also noteworthy that the CEO of Repsol, Josu Jon Imaz, and the new Prime Minister of Trinidad and Tobago insist they are in active negotiations with the U.S. government to maintain their operations in Venezuela. In the case of Repsol, it is important for its permanence in Venezuela. In the case of Trinidad and Tobago, it is essential to carry out joint offshore gas developments, which are vital for the island country's economy. Finally, and perhaps more indicative that something is brewing, is the presence and return of tankers chartered by Chevron that remain anchored in the vicinity of Aruba.

The traditional salary review of May 1 was carried out again, using indexed bonds, called "Indexed Comprehensive Minimum Income of Workers." Non-government workers gathered in Plaza Venezuela, in Caracas, to protest salary inaction and march to Parque Carabobo, west of the city, but National Police (PNB) prevented the mobilization.

The general elections, scheduled for May 25, have not aroused much interest from voters. Most find it difficult to participate in the same electoral system used in the presidential elections of July 28 last year, whose results continue to be questioned. 

By the way, in these new elections, the National Electoral Council (CNE) has scheduled the election of a governor for the disputed territory of Esequibo. The International Court of Justice (ICJ) reaffirmed on Thursday, unanimously, its provisional measures granted in December 2023 in the territorial dispute between Venezuela and Guyana and ordered Nicolás Maduro's regime to refrain from holding or preparing elections in that territory. That order is sure to be ignored.

 

Oil Operations

Activities in hydrocarbon production centers remained at a relatively constant level. However, export operations or tanker loading for floating storage have been challenging to follow, affected by cargoes loaded and returned by Chevron, the presence of zombie tankers, whose real identities and locations are more of a detective job than an oil analyst's work. Vitol (one of the big oil and products traders) appeared on the scene, taking Venezuelan crude and bringing diluent and gasoline. The same is true with Harry Sargeant's company, which remained active in the Venezuelan hydrocarbon trade but canceled its commitment to reactivate the Curaçao refinery. The PetroPiar upgrader in eastern Venezuela was stopped, apparently for maintenance reasons unrelated to Chevron's eventual exit.

Crude production, during the last week, averaged eight hundred and sixty-eight thousand barrels per day (868 Mbpd), geographically distributed as follows:

Area                      Mbpd

• West                218
• East                 126
• Orinoco Belt   514
• TOTAL          868
• 
  

National refineries processed 220 Mbpd of crude and intermediate products, with a gasoline yield of 77 Mbpd and 80 Mbpd of diesel.

The average sale price of barrels marketed under the protection of OFAC licenses, net of debt payment, was $45.91/bbl, and the weighted average of all exports was $30.23 $/BBL. Starting in June, with all licenses canceled, barring any unforeseen change, price information and amounts collected will be much more difficult to obtain, due to the complexity of tracking crude shipments from Venezuelan ports and areas designated as ship-to-ship transfer (STS).

Until now, tankers have been loaded at Jose, Bajo Brande, and La Salina terminals, and transshipments have been carried out outside Amuay and Aruba. Cargoes originating at Lake Maracaibo terminals end up loading larger tankers that transport them to the final destination or designated sites to complete the origin cleaning process. The procedure in April was so complex that traditional sources for export figures differ considerably. The difference lies in the month's cutoff time and the ability to account for reformulated cargoes on the high seas.

We estimate that April's exports were 610 Mbpd of crude and 83 Mbpd of residual fuel. 375 Mbpd were sent to China, 129 Mbpd to the U.S., 64 Mbpd to India, and 32 Mbpd to Cuba. The exported segregations were Merey-16, 484 Mbpd; Boscán, 78 Mbpd; Hamaca, 36 Mbpd; and Blend-22, 12 Mbpd.

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