M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
The oil market this week was marked by resilience amid expectations of excess supply and uncertainty about global demand. OPEC+ decisions and geopolitical tensions centered on the U.S., Russia, Ukraine, and Venezuela added volatility to oil prices.
The increase in commercial crude inventories in the U.S., doubts about the veracity of OPEC's numbers, and the International Energy Agency's (IEA) change in perspective further confused market participants. Additionally, on Friday, a cooling system failure at the CME Group (Chicago Mercantile Exchange) data center suspended futures and options operations, interrupting oil futures trading as well as equities, bonds, and currencies, just as prices were recovering.
CME Group is the leading international derivatives market and the venue where investors manage risks. Fortunately, at the time of the suspension, operations were at relatively low levels due to the U.S. Thanksgiving holiday.
GEOPOLITICS
News about negotiations on peace plans in the Russia-Ukraine conflict, or about the easing of sanctions-related tensions on Russian crude, provided some relief to markets, helping counter potential supply risks and preventing price spikes.
Ukraine and Russia
For Ukraine, a week is a long time. On November 19, reports emerged about a "peace plan" secretly negotiated between Russia and the U.S., which Ukrainians perceived, at first, as a demand for capitulation. By the weekend, European, Ukrainian, and American officials met in Geneva for an emergency summit to review that proposal. On November 26, American and Russian negotiators finalized their consultations in Abu Dhabi on the revised draft. Those familiar with the latest conversations say the document is still being revised. Ukraine is more satisfied with the latest version, but no one believes Vladimir Putin will accept it.
The negotiation process is tilting against Ukraine, which would lose territory without any guarantee of future security. The talks seek to reconcile Russian demands with Ukrainian concessions—undoubtedly two antagonistic positions that negotiators will have to reconcile if a reasonably happy ending is desired. The prolongation of the conversations, which weakened last week's hopes for a quick resolution, has kept the oil market stumbling as alleged details about the negotiations are leaked. Geopolitical volatility continues, and hopes of a possible ceasefire between Russia and Ukraine have, for now, neutralized supply concerns stemming from new U.S. sanctions against major Russian producers.
To try to accelerate the process, U.S. envoy Steve Witkoff is scheduled to travel to Moscow next week along with other senior U.S. officials to hold talks with Russian leaders about a possible plan to end the nearly four-year war in Ukraine, the deadliest in Europe since World War II.
Meanwhile, a Ukrainian attack on the port of Novorossiysk damaged one of three loading points at the Caspian Pipeline Consortium (CPC) terminal, through which more than 1% of global oil exports are shipped. Analysts stated that shipments from the terminal have been reduced by half due to the attacks. In any case, Chevron stated on Monday that tanker loading had resumed.
Also on Friday, several explosions rocked two tankers from Russia's shadow fleet in the Black Sea, near the Bosphorus Strait in Turkey, causing fires on board and initiating rescue operations, Turkish authorities and sources said. The tankers Kairos and Virat are receiving assistance in the Black Sea. Russia has also intensified its attacks on Kyiv to pressure the Ukrainian government, which is simultaneously facing a corruption scandal in its senior government.
Iraqi Kurdistan
Another region in conflict is Iraqi Kurdistan. The Khor Mor gas field, one of the largest gas fields in Iraq's semi-autonomous region, has been shut down following a rocket attack that hit a storage tank and caused a fire, the field's joint operator said Thursday, Dana Gas, a company based in the United Arab Emirates. A new condensate storage tank and export units were affected. The rocket attack is the most serious on a field in Kurdistan since mid-July, when three days of drone attacks on oil fields in the semi-autonomous region paralyzed much of the production.
Neither Kurdistan's oil production nor exports were affected. Still, the Khor Mor gas field, which supplies gas for domestic electricity generation and is in a precarious production state, was affected, accounting for 10% of total generation. The attack is presumed to have been perpetrated by militias backed by Iran and Iraq.
Middle East
In the Middle East, an intermittent ceasefire continues, as Israel has continued eliminating Palestinian operatives or detaining them when terrorist activity is detected in the area. Israel maintains that this is part of the next phase of the agreements: the disarmament of Hamas. In a curious development, Israeli Prime Minister Benjamin Netanyahu requested a pardon from the nation's president in the corruption trial he is facing, a request that appears to pose significant legal and political complexities.
FUNDAMENTALS
OPEC+ policies, which include moderate production increases, seek, according to the cartel, to maintain market stability, although doubts persist about its ability to prevent a surplus in the coming months. There are also doubts about the sincerity of its production announcements; some renowned analysts question whether even measurements from its secondary sources could be accurate.
We believe that the capacity to add incremental production immediately is not possible, except in exceptional cases such as Saudi Arabia and the United Arab Emirates (UAE), though not materially. Moreover, productions reported by secondary sources, unlike those of producing countries, better reflect reality. Some members of the group, which produces approximately half of the world's oil, have been increasing production since April to gain market share, but they appear to have reached their limits, for now.
OPEC+ Decisions
This last Sunday in November, in a virtual OPEC+ meeting, Saudi Arabia, Russia, Iraq, the United Arab Emirates (UAE), Kuwait, Kazakhstan, Algeria, and Oman "reaffirmed their decision, made on November 2, 2025, to pause production increases in January, February, and March 2026 due to seasonality."
This apprehension about volumes, coupled with the announcements of increases that OPEC+ has been making, somewhat exaggerated in our opinion, has created a scenario of excess supply at levels only seen during the pandemic, which most oil market participants seem to consider likely. This overproduction, if it materializes, will keep prices depressed during December and much of 2026.
Global Production Outlook
The countries that, according to forecasters including the International Energy Agency (IEA), are expected to increase production over the next 13 months are the U.S., Canada, Brazil, Guyana, and Argentina. Guyana, which has experienced vertiginous development, has already reached a maximum production of 900,000 barrels per day (Mbpd) with the incorporation of the fourth FPSO (Floating Production Storage and Offloading) unit, and no incremental production is contemplated until the arrival of the 5th unit in 2027. As for Brazil, the incorporation and ramp-up of new FPSOs barely exceed the decline of fields in production. Argentina, on the contrary, will grow continuously but slowly; we must remember that this is an unconventional development with its enormous declines. Thus, the supply increase, both from OPEC+ and from non-cartel countries, could be more modest than the forecasts the market seems to be following.
United States Situation
In the U.S., drilling rig and hydraulic fracturing crew activity have declined so far this year, complemented by a considerable drop in DUC wells (drilled but uncompleted wells): a 25% reduction since January 2025. According to Baker Hughes, this week, probably due to price prospects, the reduction in active rigs accelerated; we observed a drop of 12 rigs in oil activity and a modest increase of 3 rigs in gas basins. A combination incapable of orchestrating short-term growth.
The Energy Information Administration (EIA) reported that commercial crude inventories in the U.S. increased by 2.7 million barrels; the market reacted to the news, but the movement was due to higher crude imports and not to a suggestion of limited demand.
Change in IEA Demand Outlook
On the demand side, the International Energy Agency (IEA) predicted in 2023 that the global peak in oil demand would likely be reached in 2030, as governments worldwide introduced plans for a green transition and fossil fuel companies began diversifying their portfolios to include renewable alternatives. However, this month the IEA retracted this prediction, stating that oil demand could continue to grow until 2050. This reflects a change of course by many countries in their climate commitments and by oil sector companies in their efforts to diversify their energy sources.
In the IEA's World Energy Outlook report, published in November, the organization retracted its earlier prediction, suggesting that global oil and gas demand could continue to grow until mid-century, 20 years longer than anticipated. Demand will be driven by industry, residential energy, and the technology sector, as various companies invest heavily in high-energy-consuming data centers to support the deployment of advanced technologies such as artificial intelligence (AI).
According to the Current Policies Scenario (CPS), the IEA predicts that oil demand will reach 113 million barrels by 2050, representing a 13% increase over 2024 consumption, as governments prioritize their energy security over the transition to renewable energy. This year, for the first time since 2019, the IEA used a scenario based on existing government policies rather than climate ambitions, perhaps due to pressure from the Trump administration's policy changes.
Other Market Factors
On the other hand, growing expectations of a December interest rate cut by the U.S. Federal Reserve limited the decline in crude prices. A lower rate typically stimulates economic growth and increases oil demand.
On the other side of the world, China's independent refineries, the so-called teapots, have just received their new increased crude import quotas for 2026. And the timing couldn't be more opportune, as significant volumes of sanctioned crude are seeking destinations in China; these are discounted Iranian, Venezuelan, and Russian cargoes that generally arrive with altered documentation.
Price Behavior
Oil prices on Thursday showed signs of a rebound at the end of the week, but a data center outage forced CME Group to suspend futures and options trading, disrupting oil futures as well as equities, bonds, and currencies. Barrel prices failed to lift their heads and were heading toward their fourth consecutive monthly loss.
Low trading volumes in the U.S. following Thanksgiving, aggravated by a CME blackout, have contributed to price calm. It is unlikely that OPEC+'s announcement will influence confidence in either direction.
Thus, at the close of markets on Friday, November 28, the benchmark crudes, Brent and WTI, were trading at $62.38 and $58.55/bbl, respectively, practically at the same level as at the close of the previous week.
VENEZUELA
A Country Under Suspicion
Venezuela's geopolitical situation continues to be marked by significant tension with the U.S., which this week escalated to warnings of Venezuelan airspace closure and an increase in U.S. military presence in the Caribbean.
U.S. President Donald Trump issued warnings about a possible closure of Venezuelan airspace, characterized by Caracas as a "colonialist threat." This situation led to the suspension of direct flights to Venezuela by most foreign airlines serving the country. Nicolás Maduro's government responded by putting the military aviation on alert, activating defense systems, and unilaterally canceling the routes of airlines that had suspended their flights. At the same time, social and political leaders perceived as opposition have been arrested, without respecting the rights that the Constitution guarantees to all citizens.
Despite the military escalation and rhetoric, there were reports of a telephone conversation between Trump and Maduro, which the U.S. president confirmed on Sunday, November 30, although without giving details about what was discussed. Actions such as the U.S. designation of the "Cartel of the Suns" as a terrorist group generated speculation about possible future implications. Visits by the Secretary of Defense to deployed troops, by General Cane to Trinidad, and the increase in the military presence in the Dominican Republic, as well as joint U.S.-Guyana military exercises, did not help calm the situation.
On the other hand, in Washington, Congress has initiated an investigation into the probability that military actions against some vessels allegedly transporting drugs and the killing of their crews constitute war crimes. An investigation that provides ammunition to those who oppose U.S. military pressure in the Caribbean.
Economic Situation
Regarding the economy, the fight against the exchange rate gap has become more complex than expected. The shortage of foreign currency has not been addressed by reducing public spending during months with traditionally higher disbursements, nor by sliding the official exchange rate; the priority supply of foreign currency at rates considerably higher than official ones has not been effective either, due to problems in managing cryptocurrencies to avoid American interference. In any case, the official exchange rate devalued to nearly 250 Bs./$, a year-to-date devaluation of around 375%; the exchange rate gap stubbornly remains at 42%. Inflation is neither published nor discussed in Venezuela, but Prof. Steve Hanke, a scholar of the matter, anticipates that inflation is on the threshold of hyperinflation.
Oil Operations
Diluent Situation
In the oil sector, amid continued reliance on Russian naphtha as a diluent, Venezuela is once again turning to Chevron to secure naphtha supplies. Indeed, the tanker Nave Neutrino, chartered by Chevron, is transporting diluent from the Virgin Islands. Naphtha supplies are scarce in Venezuela following an explosion at PetroCedeño that reduced the capacity to separate diluent from virgin crude, and the problems faced by one of the sanctioned ships attempting to reach the Jose terminal.
During the week, the operational situation was marked by continuity of activity, despite the aftermath of the recent accident at PetroCedeño. There was also a reduction in natural gas availability at the Jose complex in the eastern part of the country, which affected petrochemical activity and had repercussions on foreign currency flow.
Average production for the week was eight hundred sixty thousand barrels per day (860 Mbpd), due to the production shutdown related to the accident, geographically distributed as follows:
- West: 231 (Chevron: 108)
- East: 117
- Orinoco Belt: 513 (Chevron: 127)
- TOTAL: 861 (Chevron: 235)
National refineries processed 226 Mbpd of crude and intermediate products, yielding 76 Mbpd of gasoline and 78 Mbpd of diesel.
In the petrochemical sector, one methanol plant was shut down due to a lack of natural gas, and Fertinitro plants are at risk of shutdown due to excess inventory.
November's export, with just a few days left to close the month, is unclear. We estimate that an average of 630 Mbpd of crude will be exported this month, mostly to China, with about 127 Mbpd to the U.S. via Chevron's license and 40 Mbpd to Cuba.
We estimate the weighted price of exported crude at $30.6/bbl.
CITGO
In the Federal Court of Delaware, Judge Leonard Stark approved on Tuesday, November 25, a $5.9 billion offer from Amber Energy, a subsidiary of Elliott Investment Management, in the court-organized auction of PDV Holding, the parent company of Citgo Petroleum, clearing the way for the sale of PDV Holding. The offer that Judge Stark considered the most appropriate also provides a $2.1 billion payment to holders of the PDVSA 2020 bond, a defaulted Venezuelan bond secured by Citgo shares, whose legality is still being litigated in New York courts.
"If OFAC grants a license to Amber Energy, and if this Court's judgment is not reversed on appeal, many of the judgment creditors who have spent years and millions of dollars trying to recover billions of dollars in judgments, to compensate them for the harm inflicted by one or more of the Venezuelan parties years or decades ago, will finally obtain relief," wrote Judge Stark.
In any case, and as expected, lawyers representing Venezuela, PDVSA ad hoc, Citgo Petroleum, and its parent companies appealed Judge Stark's decision on Monday, December 1, to the U.S. Third Circuit Court of Appeals. The appellants allege that "the forced sale process has been characterized by deficiencies and irregularities, including a conflict-of-interest involving court advisors." Other actors in the process, creditors and bidders in the auction, are also expected to file appeals.
This endless and sad saga will continue at least until 2026, according to legal experts.
[1]: International Analyst
[2]: Nonresident Fellow Baker Institute
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