M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
The news of an upcoming meeting between Presidents Trump and Putin, in principle to seek a way out of the already lengthy conflict between Russia and Ukraine, has become the main news for markets. Analysts speculate about the potential agreements they could reach: from a comprehensive agreement to a temporary ceasefire agreement. This new uncertainty kept the market with higher than usual volatility, but around already depressed price levels. The market does not entirely rule out some progress toward peace, but they are also concerned about the consequences if an agreement acceptable to Europeans or Ukraine is not reached.
Late Friday, President Trump confirmed that he will meet with his Russian counterpart, Vladimir Putin, on August 15 in Alaska. Ukrainian President Zelensky, who has not been invited to the summit where his country's future will be discussed, preemptively announced that he will not cede land to the invader.
OPEC+'s announcement that it would continue dismantling its production cuts and bring more barrels to market kept prices in a moderately bearish trend for most of the week. This occurred in an environment determined by increasing restrictions on sanctioned crude purchases by China and India, efforts to limit the use of the so-called dark fleet that transports Russian oil, and North American commercial inventory figures that reflected a new reduction.
FUNDAMENTALS
Oil market reactions have not entirely followed market fundamentals; on the contrary, the perception of insecurity regarding geopolitical components and their potential effect on demand has dominated movements. Based on available statistics, the fundamentals continue to show that the market is slightly undersupplied despite advances in supply observed within and outside OPEC+, which would push prices upward under other circumstances.
OPEC+ Situation
Preliminary indications show an increase in supply from the 8 OPEC+ countries reversing production cuts. Since the beginning of the opening announced by the group, the total increase reaches about eight hundred thousand barrels per day (800 Mbpd) for the first days of August, well below the 1.8 million barrels per day OPEC+ announcements stated for this date. As we have postulated in other articles, production nominally subject to opening is not readily available and requires potential generation activity to restore its "closed" potential condition. We continue to maintain that production volumes, according to OPEC+ announcements (2.2 MMbpd), will not reach the market in their entirety this year. Nigeria is producing at its highest levels in months. Iraq, Russia, and Kazakhstan have not reached the announced opening volumes.
- Iraq announced the imminent operation of the pipeline connecting Kurdish region production to the Ceyhan export port in Turkey; however, Kurdish production is incapacitated by recent military attacks on its infrastructure.
- Russia produces at the top of its potential, and its capacity to place its exports is hindered by sanctions and measures taken to diminish the effectiveness of the "shadow fleet" responsible for transporting Russian crude to India and China. The average Russian maritime exports have decreased from 3.2 million barrels per day in 2024 to 2.1 million barrels per day in 2025.
- Kazakhstan can only increase its production to the extent that its new fields are developed by foreign operators. Thus, the same reasons that led it to exceed its quotas prevent compliance with the new guidelines.
United States and Other Producers
The U.S. continues to play a stabilizing role by maintaining its production at around 13.2 million barrels per day, with a slight declining trend due to most American oil companies' policy to maintain or reduce their activity levels. This week, the Baker Hughes report reveals a reduction of only one unit in the active rig list, but a more detailed inspection reveals that this figure is the net result of a decrease of 4 units in the most attractive oil basins, offset by drilling activity in areas in response to local associated gas needs.
The weekly report from the U.S. Energy Information Administration (EIA) revealed a three-million-barrel drop in North American commercial crude inventories despite a reduction in crude exports.
New Supplies: Guyana and Brazil
As we have mentioned, other supply additions come from Guyana and Brazil. Indeed, ExxonMobil, the operator of the Stabroek block, has put online the One Guyana FPSO (floating production and storage unit) with 250,000 bbl/d capacity, four months ahead of schedule. Located in the Yellowtail field, this unit is the project's fourth FPSO, raising total production capacity above 900,000 barrels daily.
With more than 11 billion barrels of oil equivalent in recoverable resources identified to date, the ExxonMobil-led consortium plans to implement four additional FPSOs by 2030, which would raise total production capacity to 1.7 million barrels per day: the Errea Wittu, in the Uaru field in 2026; the Jaguar, in the Whiptail field in 2027; and an unnamed FPSO in the Hammerhead field in 2029. A large-scale FPSO is also planned to address massive amounts of natural gas in the Longtail field, which will be the country's first gas project.
The scale of the project and upcoming plans are exactly why Chevron acquired Hess Corporation - CNOOC International (Chinese state-owned) is the third partner in the block. Stabroek, already one of Latin America's largest oil producers, is on track to rival Petrobras's giant pre-salt fields in Brazil and is a key source of new barrels for the global oil market.
Global Demand
India and China continue to be the engines of demand growth. China, to a lesser degree, but India will reach a demand of 6.2 MMBPD by early 2026, an increase of three hundred thousand barrels per day in 6 months.
Mexico and Pemex
Mexico is also trying to recover its state oil company, Pemex, from the financial and operational debacle it is experiencing. The president of Mexico, Claudia Sheinbaum, unveiled a strategic plan for Pemex to achieve economic self-sufficiency and return to the path of oil and gas production growth.
The plan includes achieving financial self-sufficiency by 2027, increasing oil production, and reducing the company's debt by approximately one hundred billion dollars, starting with a reduction of thirteen billion by the end of this year. To achieve this, the government will continue providing financial support to Pemex until at least 2027.
The proposed strategy also contemplates managing significant liabilities with contractors and suppliers. The organization plans to increase production through reactivation of existing wells, development of new resources such as the offshore Zama and Trión deposits, and expanding the use of hydraulic fracturing ("fracking") for unconventional deposit exploitation, which represents a relevant change in the current government's policy.
Initiatives in refining, petrochemicals, and distribution areas will complement these actions. However, the comprehensive plan is anticipated to require time to address the company's structural problems, so substantial production increases are not expected in the short term.
Monetary Policy
In the U.S., banking and government authorities anticipate that the Federal Reserve (FED) will announce at its next meeting an interest rate cut of at least a quarter percentage point (0.25%) as the beginning of several cuts during the rest of the year, in response to retroactive adjustments regarding employment figures and unemployment levels. The Bank of England and European Central Bank have reduced rates to stimulate European industry.
GEOPOLITICS
Numerous decisions have been made in the global geopolitical sphere. The most relevant could result from the meeting between President Trump and President Putin. The market debates between various possibilities, from the trivial, that is, that they agree on nothing and it will only be a forum for presenting each party's demands, to an unlikely comprehensive agreement that ends the war and multiple sanctions. In any case, no agreement will be able to resolve in the short term the differences generated between the two parties with this invasion or heal the scars from the destruction of lives.
Tensions between the U.S. and Russia
Faced with the serious American threat to impose new tariffs on Russia in the absence of progress toward a cessation of hostilities, oil prices showed some upward trend. The market considered that these tariffs and other sanctions and pressures could significantly impact Russian exports.
President Putin decided not to risk reaching that crossroads and proposed a face-to-face meeting with President Trump to prevent him from rushing to decide. This last-minute decision has been a widely used negotiation tactic by the Russian leader: gain time without offering any commitment. Since the beginning of this conflict, Putin's strategy has been to demand and not yield.
The meeting between the U.S. and Russia will take place in Alaska on August 15, according to an announcement by President Trump, which Russian sources have not confirmed. Preemptively, Ukrainian President Volodymyr Zelensky has emphasized that he will not make territorial concessions to the invader and that Ukraine must participate in any peace solution, and showed willingness to collaborate with his partners to achieve "real" and "lasting" peace. Zelensky's comment is interpreted as a response to Trump's indication that Ukraine might have to cede territory to end the war.
Ongoing Conflict
Meanwhile, on the battlefield, a Russian drone attack in the Odesa region, southern Ukraine, damaged an oil depot owned by the Azerbaijani state oil company SOCAR. On the Ukrainian side, a drone attack caused a fire at the Afipsky oil refinery in Russia's Krasnodar region. The fire was controlled on Thursday, but the refinery suffered considerable damage. The Russian Defense Ministry said anti-aircraft defense systems shot down nine Ukrainian drones over the region during the night of August 7.
Middle East
In the Middle East, Israel's security cabinet approved a plan to take control of Gaza City, a measure that extends military operations in the devastated Gaza Strip territory. The news generated intense criticism inside and outside Israel because it makes it more difficult to find a resolution to a war that has already lasted almost two years. Far-right allies in the Israeli prime minister's coalition have been pushing for a complete takeover of Gaza as part of their promise to eradicate Hamas militants. However, the army has warned that this could endanger the lives of remaining hostages in Palestinian militants' hands.
Israeli Prime Minister Netanyahu responded to international criticism, stating that Israel's objective is not to take control of Gaza, but to liberate it from Hamas and allow a peaceful government to be established there.
Trade Tensions
On the other hand, American trade negotiations around tariff imposition have progressed, achieving agreements with several countries. However, tariff imposition for geopolitical reasons has not had the same effectiveness: tariffs on Brazil for alleged harassment of former President Bolsonaro and tariffs imposed on India for purchasing Russian crude have received resounding rejection from Brasilia and New Delhi.
The U.S. and China face an August 12 deadline to extend their tariff pause, while Trump intensifies threats of higher tariffs, pressing for Russian oil purchases. China defended its Russian oil purchases, and the Chinese Foreign Ministry said Friday that it is "legitimate and legal for China to carry out normal economic, commercial and energy cooperation with all countries in the world, including Russia."
The complexity of geopolitical events being handled in parallel, and most marked by uncertainties, makes markets, including oil, remain disoriented. The importance of geopolitics in the oil market has shifted from the Middle East to tensions between major powers.
PRICE DYNAMICS
Crude oil prices fell to a five-week low during Friday's session, responding to reports that Trump was working on a peace deal in the Ukraine war. Brent crude has been approaching $66/BBL, as reducing the risk of additional sanctions on Russia, if these do not materialize, would mitigate the risk premium that the market currently factors in.
However, a possible failure in negotiations could provoke the opposite effect. On another note, the difficulty in estimating how much crude OPEC+ can actually incorporate of the 2.2 million barrels per day announced has generated uncertainty regarding the oil market's direction.
Thus, the quotation of benchmark crudes Brent and WTI, at market close on Friday, August 8, stood at $66.59/BBL and $63.88/BBL respectively, representing a weekly loss of 4%, in Brent crude terms, compared to the previous week's close.
VENEZUELA
Chevron, the Arrival of the "Cavalry"
In recent days, attention in the Venezuelan audience has been focusing on verifying that Chevron's return to Venezuelan oil fields was being fulfilled and trying to determine when, how, and how much benefit would be obtained by PDVSA and the government in this new round of oil sanctions mitigation. Like in old western movies, the last-minute arrival of the cavalry, in this case the American oil company, is expected to save the day.
Contradictions in U.S. Policy
What no one expected was the surprising appearance of U.S. Attorney General Pam Bondi, announcing that the U.S. had increased the bounty for the capture of Nicolás Maduro, Venezuela's acting president, to $50 million. In the same video, Bondi stated that the Venezuelan regime has become a direct threat to U.S. national security.
This development, in the increasingly confusing American script regarding Venezuela is an unprecedented measure. Never before had the U.S. government offered such a sum for a sitting head of state. It even exceeds the reward offered for Al Qaeda leader Osama Bin Laden. In other words, in the White House's eyes, Nicolás Maduro is no longer just a political figure, but a priority judicial target for U.S. justice. A situation that appears incongruent with granting a license to authorize Chevron's operations in Venezuela.
Some analysts have tried to validate the existence of both policies by claiming that Nicolás Maduro has to go, but that private oil company activity allows maintaining the industry for the benefit of the Venezuelan people, without financing the Venezuelan regime, while allowing private companies to recover the money PDVSA owes them. A situation that no one has been able to explain how it would work.
Military Threats in the Region
Additionally, according to The New York Times, although not confirmed by the White House, President Trump secretly signed a directive ordering the Pentagon to begin planning the use of military force against certain Latin American drug cartels that the Administration has declared terrorist organizations. Mexico's president reacted angrily to this not-so-veiled threat of intervention, while the Venezuelan foreign ministry called the announcement about Nicolás Maduro a "smoke screen." Colombia's president, Gustavo Petro, also joined the criticism. The White House announcements seem derailed if we also factor in Trump's distancing from Lula.
Chevron Operations
Returning to the economic topic, three tanker ships Chevron had chartered for transporting crude from Venezuela to Gulf of America refineries are back. One is already anchored in Aruba waters, and the other two are approaching this same island. This is where tankers are filled with partial loads from the Bajo Grande terminal, in Lake Maracaibo. These tankers are waiting for the crude they will take to the U.S. to be ready for loading, presumably in the second half of August.
Economic Situation
Meanwhile, the economy continues its recessionary trend, despite Nicolás Maduro announcing that during the first half of the year the Venezuelan economy had grown 7.2%, a figure very different from independent estimates that place first-quarter growth at barely 2.1%, and a contraction in the second quarter.
In stark contrast to his optimism about growth, the regime has again decreed an economic emergency in Venezuela to “ protect the people" from the impact that Donald Trump's announced tariff decisions and the hardening of international sanctions on the country will have on national finances. This new decree is more likely to seek to extend the existing emergency powers, which could not be extended without a new decree.
Currency Crisis
Lower international oil prices and the hefty discounts required to place crude in the Far East have reduced foreign currency availability, accelerating devaluation and increasing inflation. As we indicated last week, this economic collapse was mainly due to the cancellation of OFAC licenses in May. The third quarter will pass with little difference from the second quarter, given that income from the new license granted to Chevron will not be received until late September and in amounts smaller than that obtained with license 41.
So the bolívar's devaluation will continue. The official exchange rate has already surpassed 130 Bs./$, with restricted amounts for importers, settled mainly in USDT; the rest of the dollar demand had to seek alternative markets with transactions above 170 Bs./$. Meanwhile, economic drivers are trying to extend the application of measures until income related to crude sold to Chevron begins to be seen, in a kind of Christmas advance.
OIL OPERATIONS
Chevron Reactivation
Chevron has already begun to resume its operational positions and contacts with oil contractors, but the process takes some time despite the company not having completely departed from its activities. During the week, much movement was observed at the PetroPiar upgrading plant in eastern Venezuela.
National Production
Crude production during the last week averaged eight hundred forty-two thousand barrels per day (842 Mbpd), distributed geographically as follows:
Area | Mbpd |
West | 210 |
East | 120 |
Orinoco Belt | 512 |
TOTAL | 842 |
Refining
National refineries processed 215 Mbpd of crude and intermediate products, with a yield in gasoline terms of 70 Mbpd and 75 Mbpd of diesel.
Petrochemical Sector
In the petrochemical sector, methanol plants operate at 85% of their capacity. Fertinitro maintains one ammonia/urea train running and the other is in startup operations, all adjusted to the natural gas availability the complex receives. The Superoctanos plant will be operated for a limited period until the available butanes in the complex are consumed.
Exports
This week, Crude exports were limited to two shipments (3.9 MMbbls) destined for the Far East. The weighted price of exported crude is at $32.16/bbl.
² Nonresident Fellow Baker Institute
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