M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
Between October 25 and November 1, 2025, the oil market was influenced by expectations that OPEC+ would announce a new production increase and developments in the trade war. Prices have remained near four-month lows, with Brent crude trading around $65 per barrel on October 31.
The oil market showed indifference to the deterioration of communications with Russia and sanctions on its oil companies, as well as to the decline in U.S. inventories, the interest rate cut by the Federal Reserve (FED), and the announcement of an agreement between Trump and Xi Jinping. An attempted rally on the last Friday of October faded before markets closed.
However, the market will continue monitoring the behavior of all these variables heading into 2026, without forgetting the geopolitical variable.
GEOPOLITICS
President Trump's anticipated Asian tour was the most discussed news in the geopolitical sphere. His first stop was in Malaysia, where Thailand and Cambodia signed a joint declaration that Trump calls a peace agreement; both countries agreed on trade terms with the U.S. He also met with Brazilian President Lula da Silva to improve bilateral relations.
In Japan, Trump and newly appointed Prime Minister Sanae Takaichi have committed to elevating their trade alliance to a "new golden era," when Washington demands that Tokyo increase its defense spending in the face of China's growing threat. The regional perception of Japan's recent and unfortunate history as a military power forces it to tread that path cautiously.
In Korea, President Trump and Chinese President Xi Jinping had a meeting lasting just over an hour and a half, in which they reached agreements that ease their relations after months of turmoil over trade issues. The agreements focused on tariffs and fentanyl trafficking. The U.S. will immediately reduce tariffs on all Chinese goods that were previously applied in response to the flow of fentanyl precursor chemical ingredients that are ultimately trafficked to the northern giant. On the other hand, China will begin purchasing bulk soybeans and relaxing export restrictions on critical minerals and rare earths.
Russia-Ukraine
Putin describes the most recent U.S. sanctions as a "hostile act" and states that Russia will not yield in its strategy and will continue with its attacks on Ukraine.
Ukraine's Foreign Minister stated that in recent months, Russia has attacked Ukraine with a cruise missile whose secret development led Donald Trump to withdraw from a nuclear arms control pact with Moscow during his first term as U.S. President. This is the 9M729 missile, which flies 1,200 km before striking Ukraine. Russia has launched missiles at Ukraine 23 times since August, according to another senior Ukrainian official who spoke to Reuters.
Ukraine has urged Washington to provide it with long-range Tomahawk missiles, which the INF Treaty did not prohibit, since at that time they were only launched from the sea. The INF Treaty (Intermediate-Range Nuclear Forces) was an agreement between the United States and the Soviet Union, signed by then-U.S. President Ronald Reagan and the General Secretary of the Communist Party of the Soviet Union, Mikhail Gorbachev.
Russia already tested its nuclear-powered Burevestnik cruise missile last week, and on Wednesday announced the test of a nuclear-powered torpedo called Poseidon. In an apparent response, President Trump ordered the Department of War on Thursday to resume nuclear weapons testing, claiming that other countries' testing programs justified it. Energy Secretary Chris Wright clarified that these tests do not involve nuclear explosions.
The military confrontation on the ground focused on the eastern city of Pokrovsk. Both sides announce advances around and in the town. Ukraine deployed an elite contingent to reinforce its position in Pokrovsk; the operation demonstrates the strategic importance of the location following the incursion of Russian troops.
On the oil side, Indian refineries are temporarily suspending purchases of Russian oil in response to recent U.S. sanctions on Russian companies such as Rosneft and Lukoil. The current stance of refineries is one of caution, seeking clarity to ensure that purchases are not linked to sanctioned entities and awaiting the possibility of obtaining supplies from traders or non-sanctioned entities. Companies such as Reliance Industries and HPCL-Mittal Energy Ltd have canceled orders and seek alternative supplies, primarily from the Middle East and the Americas.
Middle East
The ceasefire agreed between Israel and Hamas has become intermittent, as each time Israel perceives that Hamas is breaching the agreement, it bombs the Gaza Strip, where its members gather, adding more fuel to the conflict.
Two more bodies of hostages were delivered. Nine remain to be delivered according to the agreement between the parties. However, Hamas has communicated that it has completed the delivery of all bodies of deceased hostages to which it has been able to access. No progress continues to be announced in planning the next steps beyond the cessation of hostilities and hostage exchanges.
U.S. Government Shutdown
In the past week, there has been a notable shift in the Senate, with legislators from both parties discussing how to end the government shutdown. But there is no widespread optimism, and neither party is ready to announce that a solution to the 31-day shutdown has been finalized.
Rank-and-file members, Republicans and Democrats, particularly those on the Senate Appropriations Committee, have intensified dialogue as the week has progressed. They are considering extending the continuing resolution passed by the House of Representatives to allow time to finalize appropriations bills, and Democratic senators are debating a package of funding bills among their own members. The threat that low-income populations will not receive food subsidies (SNAP) has materialized, generating greater political pressure.
A Geopolitical Sale
Lukoil, Russia's second-largest oil company, has agreed to sell its international business to the Swiss-based commodities trader Gunvor. This announcement came just after the U.S. imposed sanctions on major Russian oil companies, which would complicate transactions by their international subsidiaries and make it incredibly complex and almost impossible to operate. Gunvor is no stranger to Russia; its co-founder and former shareholder, Gennady Timchenko, is believed to be Putin's friend.
FUNDAMENTALS
Oil market fundamentals also had no visible effect on prices during the week, although the closely monitored weekly statistic, published by the Energy Information Administration (EIA), provided interesting information. Indeed, commercial crude inventories in the U.S. fell by 6.9 MMbbls, partly due to lower crude imports. Likewise, gasoline inventories fell by 6.7 MMbbls.
Crude production in the U.S. and Canada remains relatively constant, while natural gas production is increasing. This is consistent with rig activity, which, according to Baker Hughes, shows a contraction of 6 oil drilling rigs and an increase of 4 rigs dedicated to natural gas.
Interestingly, ExxonMobil and Chevron's third-quarter results show production increases from incremental development and efficiency, contradicting repeated predictions that shale oil production has already peaked. On the contrary, the unconventional hydrocarbon industry is comfortable with the current profit scheme that compensates investors and finances the production potential necessary to counteract decline.
The Energy Information Administration (EIA) projects that natural gas prices will increase due to rising demand in both domestic and export markets. For example, the average price is expected to increase from $3.20 per million British thermal units (MMBtu) in mid-2025 to $4.30/MMBtu in 2026. This increase is attributed to strong demand for liquefied natural gas (LNG) exports, which exceeds domestic production.
On the other hand, the FED's decision to reduce interest rates by 0.25% will tend to stimulate the economy and, therefore, energy demand. However, some analysts are concerned about Jerome Powell's announcement that he is not sure there will be other reductions before the end of the year.
At its November 2 meeting, OPEC+ agreed to an additional increase of 137 KBPD starting in December. Beyond December, due to seasonality, the eight countries in the group also decided to pause production increases in January, February, and March 2026. This news increases the market's uncertainty regarding OPEC+'s capabilities, which, in our opinion, has been left without spare capacity and, therefore, has lost part of its ability to control the oil market.
In China, private refineries (called "teapots") are operating at the highest levels of 2025, reinforcing demand, at least to the extent allowed by quotas set by the central government.
Price Dynamics
Crude oil futures fluctuated Thursday after the benchmarks received a mid-week boost thanks to inventory data. However, the market focused on trade talks between the United States and China and the upcoming OPEC+ meeting.
Prices remained immune to the week's numerous geopolitical and fundamental events. They are awaiting information on the repercussions of the recent trade truce between the United States and China and the governmental rapprochement between Donald Trump and Japan's new Prime Minister Sanae Takaichi.
As such, at market close on Friday, October 31, the benchmark crudes, Brent and WTI, were trading at $64.77/bbl and $60.98/bbl, respectively, a loss of 1.7% compared to the October 3 close.
VENEZUELA
In recent days, probably as a result of a combined strategy, Russia, China, Iran, and Cuba have condemned the military presence in the Caribbean. Colombia's President Gustavo Petro, who OFAC recently sanctioned, has also expressed his solidarity with Venezuela in its confrontation with the U.S., which analysts see as a tactical rapprochement with Nicolás Maduro.
Qatar, the Vatican, Dominica, Barbados, and even President Lula da Silva have also offered or called to mediate in the Venezuelan situation. However, Donald Trump maintains that his presence in the Caribbean concerns his country's security and the threat of narco-terrorism cartels and, therefore, mediation is not an option.
Therefore, Venezuela's situation remains complex militarily, politically, and economically due to a government that has a strong symbiosis with the military establishment. The government has consistently repressed dissent, and there is an economic crisis aggravated by very high inflation and dependence on oil trading at low prices. Military participation and deprofessionalization have disrupted institutions and the transparency of their operations.
The Miami Herald and the Wall Street Journal reported that their sources had confirmed that the U.S. was about to attack military targets involved in drug trafficking. The news, as expected, was denied by President Trump, who emphasized that if he had plans, he wouldn't make them public either. To date, the U.S. Department of Defense has announced the destruction of at least 14 vessels in the Caribbean and around 60 human casualties, presumably drug traffickers. Finally, it was confirmed that the U.S. aircraft carrier Gerald Ford is sailing toward the Caribbean.
In any event, in Venezuela, defensive preparations and political maneuvers aimed at discrediting those with different ways of thinking continued. The most recent tactic is to request that the Supreme Court of Justice (TSJ) revoke the Venezuelan citizenship of those whom the regime accuses of supporting an alleged military intervention in Venezuela, a process they are attempting to initiate against opposition leader Leopoldo López. The unofficial spokesperson for the revolution, Luis Ratti, asked that the names of María Corina Machado and Edmundo González be added to the TSJ process.
After the National Assembly (AN) declared Trinidad and Tobago's Prime Minister persona non grata, Maduro suspended all gas agreements between Venezuela and that island nation. The measure has little immediate effect on either side, since the suspended exploitation and commercialization plans are long-term.
Once again, the economic emphasis was on reducing the gap between the official and alternative foreign exchange markets, for which the official exchange rate has been allowed to slide, albeit at a less accelerated pace. Additionally, the amounts offered at that rate have been gradually reduced. The rest of the available foreign currency was delivered, via USDT, at values substantially higher than the official exchange rate, bringing the weighted rate to levels close to the alternative rate. As such, the gap was reduced to 36%. Tax collection also increased, primarily due to the indexation of collection elements, and liquidity was further restricted. This trend could prove challenging to maintain due to lower October exports and low oil prices.
Oil Operations
This week, electrical outages, oil spills, and floods have affected operations, although not materially.
Weekly crude production has shown a minor reduction, reaching eight hundred sixty-five thousand barrels per day (865 KBPD), geographically distributed as follows:
• West 228 Chevron: 108
• East 118
• Orinoco Belt 519 Chevron: 125
• TOTAL 865 Chevron 233
National refineries processed 217 KBPD of crude and intermediate products, yielding 73 KBPD in gasoline and 75 KBPD in diesel.
In the petrochemical sector, one Metor methanol train is out of service; the other train and the Supermethanol plant are operating at 85% capacity. Fertinitro's ammonia and urea trains operate at controlled rates based on gas availability. SuperOctanos remains out of service.
Crude exports in October were substantially lower than the previous month; 531 KBPD was shipped from Venezuela. 410 KBPD was destined for the Far East (China), and 121 KBPD was shipped in 11 cargoes to refineries on the Gulf of America coast (formerly Gulf of Mexico). The exported grades were Merey 366 KBPD, Boscán 92 KBPD, and Hamaca 73 KBPD.
We estimate that the weighted price of exported crudes is $31.1/bbl. Revenues from crude exports in October are $64 MM less than in September.
