M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
Predictions of a global oil oversupply and geopolitical tensions related to Russia's persistent attitude of seizing Ukrainian territories at all costs marked the oil market this week. This resulted in a week of stable but downward-trending prices, albeit with intraday volatility.
The international community anticipates that President Trump will take action against the Cartel of the Suns and other terrorist organizations allegedly operating in Venezuela and its surroundings. Still, oil markets have not reacted to this threat that would affect supply, and sentiment leans bearish. On the other hand, the U.S. federal government shutdown is affecting jet fuel consumption nationwide. However, gasoline and distillate inventories have fallen sharply, suggesting that oil demand may be stronger than crude inventories indicate.
The United Nations climate change summit, COP30, is being held in Brazil between November 9 and 21, with less fanfare than previous COPs, for various reasons, including the absence of the U.S.
The ten years since the signing of the Paris Agreement at the United Nations Climate Change Conference (COP21), which sought to mitigate warming by placing limits on greenhouse gas emissions, have been nothing short of disappointing. For activists, politicians, and legislators, the measures have not been effective in achieving the sought-after goal, which is now generally considered unattainable. Thus, one of the challenges of the new summit is to guide environmental activity along more collaborative paths and minimize the dogmas on both sides of a discussion that remains necessary in the long term.
GEOPOLITICS
Geopolitical developments have generated a sense of global uncertainty. The belligerence between major powers presents the most destabilizing situation, a confrontation closely linked to debates about the future world order. As if it were a regression to the 20th-century Cold War, the specter of nuclear weapons raises its head again, this time in the speeches of Presidents Donald Trump and Vladimir Putin.
Elections in the United States
Different state and local calendars govern gubernatorial and mayoral elections in the U.S., and the most recent ones took place on Tuesday, November 4, 2025. These elections are important political barometers and do not follow a uniform federal cycle. President Trump has acknowledged that the results were not "good" for Republicans, but has assured that his party learned "much" from them, without being very specific about what. Across the country, participation in local elections was very high. In the gubernatorial elections in New Jersey and Virginia, where Democrats Mikie Sherrill and Abigail Spanberger won, they campaigned with an anti-Trump message.
In the New York City mayoral election, as expected, Zohran Mamdani emerged victorious: the first immigrant to be elected mayor of the city. Mamdani, born in Uganda to Indian parents, professes the Muslim faith; he is a member of the Democratic Party and the Democratic Socialists of America organization. His left-wing populist platform has made him the main political target of the White House, which labels him a communist and promises to besiege him economically.
Federal Government Shutdown
The U.S. federal government remains in an active shutdown, initiated on October 1st, which, as of this writing, has become the longest government shutdown in the country's history.
The shutdown, resulting from the lack of budgetary agreement between Democrats and Republicans, has caused approximately 750,000 federal employees to be temporarily furloughed, while others, considered "essential," continue working without receiving pay. The situation is significantly affecting various services, including delays and cancellations of hundreds of flights at major airports across the country due to the shortage of air traffic controllers, as well as the suspension of social programs such as SNAP (Supplemental Nutrition Assistance Program, also known as food stamps). A significant issue is the impact on the generation of economic statistics, which are essential for informed market decision-making.
Note: A Sunday night Senate agreement could be about to resolve the government shutdown, after a group of moderate Democrats dropped their key demand: a guaranteed extension of Obamacare subsidies. The agreement paved the way for a Senate vote in which eight Democratic defectors voted to break the legislative logjam and clear the first obstacle to reopening the government after nearly six weeks.
Putin's Tunnel Vision
Vladimir Putin's obstinacy in controlling all of eastern Ukraine through a war of military attrition and, in the civilian sphere, through intense bombing of indiscriminate targets throughout the country, continues to claim victims and raise the geopolitical temperature. Ukraine's response has been to defend its positions to the utmost, as on the Pokrovsk front; it also continues its drone attacks against Russian oil facilities, which are effectively affecting the Russian oil business and, therefore, its ability to finance the war.
The export of Russian refined products has been considerably reduced due to damage to refineries and shipping terminals, resulting in a surplus of crude oil for export. This surplus, however, faces limitations due to U.S. sanctions on oil companies Rosneft and Lukoil, as well as general sanctions imposed by the EU.
The issue of the U.S. supply of Tomahawk missiles to Ukraine remains on the table, awaiting only President Trump's approval. By the way, Trump negotiated an exception to the sanctions with President Orbán, allowing Hungary to access Russian fuel, which was justified by the country's limited access to maritime terminals for meeting its energy needs. Hungary, a full member of the European Union, thus distances itself from the Union's general position.
Gunvor Blinked
The Cypriot-Swiss commodities trading company, Gunvor, has withdrawn its $22 billion offer for Lukoil's foreign assets after the U.S. Treasury Department announced it would deny the license, calling it a "Kremlin puppet," and signaling Washington's opposition to the operation. The decision frustrates what would have been the largest acquisition in Gunvor's history. It highlights Washington's effort to make sanctions effective in isolating Russia and suffocating the income it uses in the war in Ukraine.
Gunvor responded by email that the Treasury Department's statement was "fundamentally wrong and false" and expressed its willingness to "take the opportunity to correct this clear misunderstanding." Meanwhile, Gunvor is withdrawing its proposal for Lukoil's international assets.
Peace in the Middle East, Little Progress
The Palestinian-Israeli conflict and the situation in the Middle East remain constant points of attention; the fragility of the ceasefire in Gaza and the successful Israeli incursions against Hezbollah in southern Lebanon maintain the region's instability. Hamas returned several bodies of hostages and Israeli soldiers.
Kazakhstan declared it will join the Abraham Accords between Israel and Arab and Muslim-majority countries. The action, announced on Thursday, is largely symbolic, as Kazakhstan has maintained diplomatic relations with Israel since 1992 and is geographically farther from Israel than the other Abraham Accord nations: Bahrain, Morocco, Sudan, and the United Arab Emirates.
FUNDAMENTALS
Elucidating the issue of oil oversupply is becoming increasingly complex, which is not surprising when dealing with projections of multiple variables with limited relative interdependence. Projections based on technical arguments, if not theoretical, do not correlate with current actual figures. For example, firm announcements of production increases often fail to materialize in reality. The International Energy Agency (IEA), the Energy Information Administration (EIA), and some banks, which have been projecting significant volumes of incremental production, now justify the delay in the materialization of their scenarios by indicating that a good part of the production "surpluses" are going to fill China's strategic reserves and that another significant volume is in floating inventory: in transit aboard tankers, presumably sailing without final buyers.
There are no solid reasons to doubt these explanations. Still, we consider that the strategic reserves of different countries around the world, including those of the U.S., which, by the way, must be replenished, form part of the firm demand that global supply must meet. As for the increase in floating volumes, this is due to the sanctions imposed on Iran, Venezuela, and Russia, which transit longer at sea due to their complex transshipment processes, including blending, name changes, and ownership changes, which aim to disguise the origin of the crude oil. This process of circumventing sanctions is becoming increasingly time-consuming as monitoring becomes more efficient.
In any case, for the remainder of 2025 and 2026, we believe the market is heading toward maintaining a healthy balance between demand and supply, under conditions in which the idle production capacity of countries such as Saudi Arabia, the UAE, and Iraq has been exhausted during the market recapture process. By the way, China's oil demand reached higher levels, attracted by higher refining margins, which intensified the utilization of the refining fleet, both public and private.
According to the ADIPEC conference (Abu Dhabi International Petroleum Exhibition and Conference), an annual event that brings together leaders, companies, and experts from the global energy sector, there are indications of healthy oil demand through 2026. This was complemented by OPEC+'s decision to pause production increases in the first quarter of next year; we think this is due to the non-existence of surplus crude. When asked about the possibility of excess oil in 2026, UAE Energy Minister Suhail al-Mazrouei stated that "I'm not going to talk about an oversupply scenario," adding that "I think everything we're seeing is more demand."
Eight OPEC+ members will meet again on November 30, the same day as the whole group meeting. The last element of the cuts for the entire group will remain until the end of 2026, according to the agreement announced last week.
Regarding the activities of the U.S., Canada, Brazil, Guyana, and Argentina, which are mentioned as sources of production growth in the coming months and years, we observe no significant differences from our analysis outlined in recent editions. In this regard, the U.S. and Canada maintain maintenance activities rather than growth, in line with the financial discipline that operators apply in this price range. Guyana and Brazil increase their production as new floating production units (FPSOs) enter service and carry out their "ramp up" process, resulting in approximately 150 kbpd additional in Guyana and 350 kbpd in Brazil until the end of 2026. In the case of Argentina, the foreseeable increases in scheduled activities are expected to be approximately 70,000 barrels per day (kbpd) over the next 13 months.
We conclude, based on all available information, that there is a global need for more energy and that conditions must be ensured to incentivize investments that meet these increases, including, in particular, the growth of AI and data processing centers.
Price Dynamics
Oil prices showed volatility, with a general downward trend, although they recorded a modest rebound at the end of the week. The futures market was marked by scenarios pointing to a global supply surplus, OPEC+ decisions, and an increase in U.S. commercial crude inventories. However, the increase corresponds entirely to higher crude imports and lower refinery runs, which were offset by a considerable reduction in gasoline and distillate inventories.
Thus, at market close on Friday, November 7, the benchmark crudes, Brent and WTI, were trading at $63.63/bbl and $59.75/bbl, respectively, representing a 1.8% loss compared to the previous week's close.
VENEZUELA
Are All Options on the Table?
Venezuela's political-economic situation has been characterized by the persistence of its economic crisis, which Nicolás Maduro's administration insists on camouflaging behind growth figures, in stark contrast to information issued by international organizations. Politically, pockets of instability and the repression of dissent mark the atmosphere. Added to this is the non-specific external military threat against the alleged narcoterrorist activities of the Cartel of the Suns. Unverified information suggests that communication channels exist for negotiating the end of the current administration. On the other hand, formation flights of military aircraft are observed in the national territory, and surface-to-air missiles are deployed, in an evident strategy by the regime to show strength internally.
In the economic sphere, the most significant development is that efforts to close the gap between the official dollar exchange rate and other markets have suffered a setback due to the cut in hydrocarbon exports in October. Without foreign currency, the outlined strategy cannot be implemented. In fact, a slight rebound in the gap has been observed in recent days. Despite efforts to cut public spending, the material reduction in foreign currency supply at the official rate, and the significant increase in foreign currency supply at higher rates, the official rate reached 231 Bs./$, and the gap with other markets stood at nearly 37%.
While private sources and international organizations agree that the country is in a recessionary process, characterized by reduced consumption, currency devaluation, and runaway inflation, official information from the officials in charge of the economy indicates sustained GDP growth of 8%.
Oil Operations
At the José Antonio Anzoátegui Complex (also known as José), located on the northeastern coast of the country, an operational emergency developed, escalating into an environmental emergency affecting the area, including surrounding towns and cities.
The accident appears to have originated in one of the complex's upgraders, which processes Orinoco Belt crude, specifically in an explosion related to coking drums. However, it has not yet been determined whether the incident occurred at PetroCedeño or PetroPiar (two of the Orinoco Belt's joint ventures), although all indications suggest that it took place at PetroCedeño due to its proximity to the complex. The flames reached the coke and sulfur accumulations located at PetroRoraima facilities, generating an enormous toxic cloud that enveloped a large area around the complex, and the surrounding cities were engulfed in a white cloud.
After at least two days, the fire was extinguished. As of Sunday night, there has been no official statement from either PDVSA or central or local authorities, nor have instructions been given for affected civilians. There are rumors of fatalities, but there is no official information.
This accident may have affected tanker loading and diluent unloading activities; however, due to the secrecy in information handling, delays have not been confirmed.
The delay in the arrival of Russian diluent affected Merey crude blending in the second half of October and continues to impact blending capacity. Apparently, the delay was due to logistical problems at the terminal and payment problems.
Production and Refining
Weekly crude production averaged eight hundred sixty-three thousand barrels per day (863 kbpd), geographically distributed as follows:
• West 228 Chevron: 108
• East 118
• Orinoco Belt 517 Chevron: 125
• TOTAL 863 Chevron 233
National refineries processed 226,000 barrels per day (kbpd) of crude and intermediate products, yielding 75,000 kbpd in gasoline and 79,000 kbpd in diesel.
In the petrochemical sector, operations continued without changes from the previous week; however, it is unclear whether the accident in the Jose area impacted the operation of petrochemical plants.
Exports
Exports during the first days of November followed the pace of October, but we suspect there will be some delays due to the emergency the complex is currently experiencing.
We estimate that the weighted price of exported crude oil is $ 30.60 per barrel.
[1]: International Analyst [2]: Nonresident Fellow Baker Institute
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