M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
Judging by the apparent convergence of opinions from many analysts, the oil market is heading toward a scenario of supply surplus; analyses that seem to reinforce each other in a classic example of "Groupthink." Even OPEC's November report, which has consistently argued that there is no such surplus, has been interpreted by some as proof of the supposed supply surplus for 2026. However, it's unclear how anybody can reach this conclusion. In any case, this supposed cohesion of opinions has had a substantial bearish impact on oil prices and the activities surrounding them.
On the other hand, some geopolitical factors have partially offset this trend. We refer to the drone attacks carried out by Ukraine that have put Russia's most important Black Sea terminal out of service, also affecting the CPC (Caspian Pipeline Consortium) terminal that handles Kazakhstan's exports, and to Iran's interception of a product tanker sailing off the coast of the United Arab Emirates (UAE) and hijacked to Iranian waters. Similarly, additional attacks against Russian refineries continue to deteriorate the Russian economy's capacity to serve its domestic markets and generate sufficient exports to finance its budgets, particularly the military budget.
Thus, crude oil prices remained under pressure, as the narrative of supply surplus managed to eclipse the disruptions in Russian supply. Crude recovered from its lows, but concerns about a supply surplus persist, creating very high price volatility.
GEOPOLITICS
The geopolitical variable is once again taking control. Ukraine's strategy of targeting Russian refining, storage, and dispatch facilities, to restrict its revenues from hydrocarbon sales and create chaos in the Russian domestic market, appears to be succeeding. Indeed, on Friday, the Russian port of Novorossiysk, in the Black Sea, temporarily suspended oil exports, about two million barrels per day, following a Ukrainian attack with missiles and drones. The attack could affect Kazakhstan's exports through the CPC system. The refinery in the Saratov region and its storage yard were also severely damaged by Ukrainian attacks.
This week's combined attack was one of the largest against Russian oil export infrastructure in recent months, following the intensification of Ukraine's strategy against Russian refineries, storage centers, and loading terminals. The paralyzing effect of these attacks is compounded by the sanctions imposed by the U.S. and the European Union (EU) on Russian oil and its operating companies.
Another element that could lead to additional conflict in the Middle East is the interception by Iran's Revolutionary Guard (IRGC) of the Marshall Islands-flagged product tanker, M/V Talara, and its transfer to Iranian waters after passing through the Strait of Hormuz; the vessel's operator reported losing contact with the crew. The tanker was sailing off the coast of the United Arab Emirates (UAE) and was carrying a cargo of high-sulfur gas oil from Sharjah, UAE, bound for Singapore.
These events remind us of the fragility of energy systems in regions plagued by armed conflicts and sanctions, which translates into incremental volatility and upward pressure on prices.
Finally, after 43 days of the U.S. federal government shutdown, President Trump signed the budget agreement. The law signed by the president guarantees funding for most federal agencies until midnight on January 30 of next year. Although six Democratic senators decided to vote "across the aisle," which allowed the parliamentary agreement to be reached, the majority of the Democratic caucus believes that the underlying issues have not been resolved, which guarantees a new impasse in February 2026.
FUNDAMENTALS
Every month, OPEC publishes a report on the oil market that is read by analysts searching for signals about the direction the group foresees. The most recent one has caused waves in the market, not because of what it contains, which seems to be more of the same, but because of the effect it has had on prices. According to the interpretation of some analysts, the cartel now foresees a balance in the global market for 2026, due to increased production from non-OPEC countries and inventory recovery, which would represent a change from its previous forecast of a deficit.
This interpretation, allegedly extracted from the November report, triggered a wave of selling that affected prices by 4%. We say allegedly because, according to our reading, OPEC's November report maintains its demand outlook and makes minor adjustments to the incremental production from non-OPEC+ contributions (from 100 to 200 Kbpd).
On the supply side, the report does not mention that OPEC+ countries' production has fallen by 400 Kbpd between August and October. Additionally, and not mentioned in OPEC's report, the organization's shut-in crude volumes (referred to as spare capacity) are practically non-existent, and no determined effort is being made to reverse this trend.
OPEC's analysis projects that liquid production from non-OPEC countries will increase by approximately 1.3 Million Barrels per Day next year. In comparison, global oil demand is expected to rise by 1.6 million barrels per day to 106.2 Million Barrels per Day, in line with previous projections. The deficit that OPEC had forecast in October for 2026 will remain or tend to disappear, depending on the incremental volumes assigned to OPEC+. For now, as we mentioned, OPEC+ does not appear to be in a position to add additional volumes.
IEA Report
Another notable development is the International Energy Agency (IEA) 's monthly report, which was also published. The report maintains its forecast of a record supply surplus of more than 4 million barrels per day next year. This projection is based on the expectation that oil supply will increase by another 2.5 MMbpd next year, while demand will increase by only 770 Kbpd.
It's noteworthy that among the countries listed in that report as sources of the largest non-OPEC+ supply additions, none shows material changes in the next 14 months. In fact, growth forecasts in Brazil and Canada have diminished compared to forecasts from a few months ago from the same countries and the companies operating there.
In any event, given the preponderance of sources projecting a supply surplus, we will take as a base case for 2026 one of low prices with a downward trend. The scenario for our internal numbers will remain based on demand related to economic and population growth, and on supply driven by non-OPEC+ growth and by OPEC+ barely replenishing the natural decline of fields. This latter combination would keep supply, at best, in balance with demand and, consequently, prices would reach $70/bbl (Brent).
Current Policies Scenario
The IEA has also published its annual energy report, WEO 2025, which has generated news for the reincorporation of the Current Policies Scenario (CPS). The IEA had quietly abandoned CPS in 2019, under heavy pressure from environmental activist groups. Instead, it opted for a "Stated Policies Scenario" (STEPS), an "exploratory" scenario based on speculative climate policies. The IEA's use of STEPS raised concerns about the energy transition, which distorted projections of future oil and natural gas demand.
The resurrection of CPS brings back to the table the continued growth of fossil energy demand and distances the possibility that the goals of COP21, the Paris Agreement, can be achieved, and postpones the so-called "demand peak" that the IEA had been projecting.
Global Carbon Budget
In the same vein, the annual "Global Carbon Budget" report was published. In that report, one can read the following:
"With CO₂ emissions still rising, keeping global warming below 1.5°C is no longer viable," said Professor Pierre Friedlingstein of Exeter's Global Systems Institute, who led the study.
"The remaining carbon budget for 1.5°C, of 170 billion tons of carbon dioxide, will disappear before 2030 at the current emission rate. We estimate that climate change is now reducing the combined land and ocean sinks, which is a clear signal from planet Earth that we need to reduce emissions drastically."
Balancing energy needs and addressing climate change will continue to be an equation to be solved.
PRICE DYNAMICS
Over the past week, oil prices experienced a downward trend, primarily due to the potential for a global supply surplus, concerns about demand, and the rise in commercial crude inventories in the United States. However, at the end of the week, factors such as Ukrainian attacks against oil infrastructure in Russia and the hijacking of a tanker by Iran near the Strait of Hormuz provided temporary support for prices.
Thus, at the close of markets on Friday, November 7, the benchmark crudes, Brent and WTI, were trading at $64.39/bbl and $60.09/bbl, respectively, representing a 1.2% rebound from the previous week's close.
VENEZUELA
"Southern Spear" and Other Confusions
The accumulation of U.S. troops, warships, and combat aircraft continues in the Caribbean Sea region, to which this week's arrival of the aircraft carrier Gerald Ford was added. On Thursday, November 13, U.S. Secretary of Defense Pete Hegseth announced Operation Southern Spear on his "X" social media account, without providing further details about when and what military actions might take place. This operation has the theoretical purpose of combating drug trafficking and narco-terrorism in the Caribbean Sea and the Western Hemisphere, and defending the northern country against drugs. The operation involves the mobilization of the U.S. military, navy, technology, and air forces, described as the largest since the Gulf War.
The operation unfolds in a context of high tension between Washington and Caracas. Venezuela has denounced that the operation constitutes a plan to destabilize it and justify a possible military intervention, which has drawn criticism from some countries in the region: Colombia, Brazil, and Mexico. So far, it is reported that activity has been limited to attacks against 20 "narco-boats" in the Caribbean Sea and the Pacific Ocean, which have caused at least 79 casualties.
As if the tension were not already high enough, on Sunday, the 16th, the State Department issued a press release from Secretary Rubio:
"The State Department intends to designate the Cartel of the Suns as a Foreign Terrorist Organization (FTO), effective November 24, 2025. Based in Venezuela, the Cartel of the Suns is headed by Nicolás Maduro and by other high-ranking individuals of Maduro's illegitimate regime, who have corrupted Venezuela's military, intelligence, legislature, and judiciary. Neither Maduro nor his cronies represent the legitimate government of Venezuela..."
That same Sunday, President Trump, in an impromptu interview, added further confusion to the situation, suggesting they had not yet made a decision on an attack, but at the same time stated they had received signals from Caracas to initiate discussions they might consider. It's difficult to discern whether this confusion is by design or the product of conflicting visions within the U.S. administration.
Venezuelan Economy
Regarding the Venezuelan economy and the administration's main objective, the process of closing the gap between the official Bs./$ exchange rate and alternative rates is making little progress. The combination of fewer foreign currency revenues from hydrocarbon sales, a lower level of tax collection, and problems in settling foreign currency sales in USDT widened the gap for importers to satisfy their dollar needs. The difficulties faced in receiving "stablecoins" are attributed to a blockade exercised by OFAC on the process, which is foreseeable given the closeness of the USDT process to the U.S. Treasury. The cryptocurrency used may be replaced, but in exchange for liquidity and availability.
Thus, the gap between foreign exchange markets again exceeded 40%, with an official exchange rate of around 235 Bs./$, which further pressures inflation, which is reaching worrying levels.
Oil Operations
The oil situation has not achieved the announced growth, partly because Chevron's current license is considerably less attractive than its previous one, License 41, and external and internal political tensions keep the country’s risk so high that it scares away investment even under the protection of the Anti-Blockade Law.
Companies that benefited from OFAC licenses, Repsol and Maurel & Prom, are waiting for developments, carrying out only maintenance activity. OPEC's most recent publication confirms that Venezuelan production has slowed to about 950 Kbpd, according to its secondary sources while our estimates detect a similar trend, but at levels of 860 Kbpd.
Following the unexplained accident in the Jose area, located in the east of the country, which resulted in the emission of polluting clouds that covered the region, the operation returned to normal. There are no official estimates of the damage to facilities or the commercial value of the coke and sulfur incinerated in the upgrader complex.
Due to a lack of investment and challenges with diluent logistics, all activities are currently focused on reducing deferred production. Crude national output has stabilized at around 860,000 barrels per day (860 Kbpd).
Average Weekly Production
Average weekly production distributed geographically was as follows:
· West: 227 Kbpd (Chevron: 108)
· East: 117 Kbpd
· Orinoco Belt: 516 Kbpd (Chevron: 125)
· TOTAL: 860 Kbpd (Chevron: 233)
Refining and Petrochemicals
National refineries processed 234 Kbpd of crude and intermediate products, yielding 80 Kbpd of gasoline (of dubious quality) and 77 Kbpd of diesel. The PetroPiar upgrader continues to operate normally.
The petrochemical sector continued operating the methanol plants (Metor and Supermetanol) and fertilizer plants (Fertinitro) at the levels that gas availability allows; one of the ammonia trains is under maintenance, while the SuperOctanos plant remains out of service.
Exports
November exports are averaging below the scheduled 600 Kbpd, due to delays in vessel loading during the Jose accident and the availability of Merey 16 due to blending problems. Destinations for exported crude and products are limited to China, the U.S., and Cuba.
We estimate that the weighted price of exported crude is $30.4 per barrel.
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