M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
The global oil market experienced a week of significant volatility, with barrel prices rebounding nearly 6% following a tight balance between supply and demand. The anticipated phone conversation between Trump and Xi Jinping partially calmed markets regarding trade tensions, while geopolitical conflicts on multiple fronts maintained elevated risk premiums.
According to the EIA, market fundamentals showed strength, particularly in the United States, where commercial crude inventories decreased by more than 4 million barrels. Canadian wildfires shut down 300,000 barrels per day of production, while internal frictions in Iraq between the central government and the Kurds reduce effective supply.
POLITICAL AND GEOPOLITICAL ANALYSIS
Domestic Tensions in the United States
The rift between Donald Trump and Elon Musk became the most relevant political event of the week, transforming into a public confrontation that impacted financial markets. Musk rebelled against the "Big Beautiful Bill," the ambitious tax bill that would add more than $2.4 trillion to the deficit over the next decade.
The conflict escalated when Musk accused the government of “ingratitude” and promised to block Congress's approval of the budget project. Cross-accusations on social media, including references to Jeffrey Epstein, caused an immediate decline in Tesla shares and halted the S&P 500's rise.
China-United States Trade Relations
The 90-minute phone conversation between Trump and Xi Jinping resulted in the resumption of trade negotiations scheduled for June 9 in London. This communication temporarily eased tariff tensions and opened possibilities for additional rare earth supplies, a critical element for the U.S. automotive industry
International Conflicts
Ukraine-Russia: Tensions intensified following a successful Ukrainian attack that destroyed part of Russia's strategic military aviation. In retaliation, Russia launched massive drone and missile attacks against Kyiv, Chernihiv, Lutsk, and Ternopil. Peace talks in Istanbul continued without concrete results.
United States-Iran: Nuclear negotiations remain stalled after Tehran rejected transferring its enriched uranium inventory to the U.S. Treasury Department. The United States responded with new sanctions targeting 10 individuals and 27 Iranian commercial entities.
Middle East: The situation in Gaza continued to deteriorate with multiple Israeli attacks in the Muwasi area and operations against Hezbollah installations in Beirut. Threats from Yemeni Al Qaeda against Trump and Musk added a new dimension of regional risk.
MARKET FUNDAMENTALS
Global Supply
U.S. production remains stable at 13.3 million barrels per day, with a slight declining trend. According to Baker Hughes, the number of active rigs decreased, with four additional rigs ceasing operations.
According to the EIA, U.S. commercial crude inventories decreased by 4.3 million barrels, reflecting healthy demand despite lagging exports due to tariff discussions.
OPEC+ implemented nominal production increases of 450,000 barrels per day, mainly in Saudi Arabia, the United Arab Emirates, Kazakhstan, and Oman. However, internal confrontations in Iraq between Baghdad's central government and the Kurdistan Regional Government continue to affect the cartel's effective production.
Mexico, an OPEC+ member, has not managed to halt the decline in its production. In the first quarter of 2025, its production fell to 1.62 million barrels per day, representing an 11.3% decrease compared to the previous year. Crude production in May was 1.5 million barrels per day. Canada faces disruptions from wildfires that keep 300,000 barrels per day of production shut down, although recent rains have provided some temporary relief.
U.S. payroll growth slowed modestly in May, adding 139,000 jobs. The unemployment rate remained stable at 4.2%, providing critical data for future Federal Reserve decisions.
Investment Outlook
According to the new IEA World Energy Investment 2025 report, global energy investment will reach a record $3.3 trillion. Clean energy technologies will attract $2.2 trillion, double that of fossil fuels.
Investment in oil, natural gas, and coal is estimated at $1.1 trillion, a 6% reduction from the previous year. This trend raises concerns about future supply crises and risks to energy security.
PRICE DYNAMICS
Barrel prices closed the week with a gain of over 5%, driven by trade negotiations between the United States and China and the maintenance of high geopolitical risk premiums. At Friday's close on June 6, Brent and WTI benchmark crudes were trading at $66.47/bbl and $64.58/bbl, respectively.
The market has modified its projections, shifting the crude oversupply forecast from 2025 to well into 2026, reflecting a tighter supply and demand balance than previously anticipated.
VENEZUELAN SITUATION
Political Landscape
The Venezuelan regime surprisingly announced a municipal electoral process for July 27, with extremely brief timeframes that make it challenging to organize candidates and campaigns. The results of the May 25 elections have not yet been formally published, although the National Electoral Council has already assigned National Assembly seats without following established legal procedures.
Economy and Policies
Vice President and Oil Minister Delcy Rodríguez has modified her usual discourse, now mentioning low international oil prices and the need to preserve foreign currency. There is talk of "coordination" to "harmonize" the economy instead of direct price controls.
The Maduro administration continues seeking relief from U.S. economic sanctions, exempting President Trump from responsibility and seeking allies like Richard Grenell. Triangular bartering through traders is being explored to solve the diluent and fuel problem.
Foreign currency availability has decreased in May due to lower crude prices and the implementation of oil export collections through non-traditional mechanisms, including cryptocurrencies. The official exchange rate has exceeded 98 Bs./$.
During the weekend, unconfirmed rumors circulated about a possible increase in non-subsidized gasoline prices from $0.5/liter to $0.75/liter.
Oil Operations
June represents a critical month as it is the first without the benefit of OFAC licenses, which expired on May 27. Production activities that Chevron and Maurel & Prom managed in their respective joint ventures are being transferred to PDVSA, including the PetroPiar upgrader in José. Meanwhile, Repsol indicated it continues in conversations with U.S. authorities.
National Production:
- Total production: 840,000 barrels per day
- West: 208,000 bpd
- East: 121,000 bpd
- Orinoco Belt: 511,000 bpd
Refining:
- Average processing: 227,000 bpd of crude and intermediate products
- Gasoline production: 86,000 bpd
- Diesel production: 74,000 bpd
May Exports:
Total crude: 628,000 bpd
- China (direct and via Malaysia): 432,000 bpd
- Cuba: 80,000 bpd
- United States: 116,000 bpd
Refined products: 55,000 bpd (mainly to Singapore and asphalt to the U.S.)
Regional Development
Trinidad and Tobago advanced in the Shell natural gas project at the Manatee discovery, which is continuous with the Lorán discovery in Venezuelan waters. The project's production start date is 2027, which could affect Venezuela's future interests in developing the Lorán Field.
CONCLUSIONS AND OUTLOOK
The global oil market is highly volatile, characterized by multiple geopolitical tensions and relatively solid fundamentals. Supply disruptions, sustained demand, and international conflicts maintain elevated risk premiums.
The outlook for the rest of the year points to a tight supply and demand balance, with the potential for additional volatility depending on the evolution of geopolitical conflicts and trade policy decisions by major economies.
In Venezuela's specific case, the country faces significant political and economic challenges. Oil production remains marginal globally, and the fiscal situation requires structural reforms to achieve sustainable stability.
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