M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
The beginning of the year in the oil market has been anything but boring. Following the U.S. military intervention in Venezuela and announcements that the White House would "administer" the South American country's oil industry, President Trump announced a naval deployment toward Iran's coasts in response to the intensification of the Islamist regime's repression against its dissidents.
The market reacted by raising geopolitical risk premiums, as not only Iranian crude production but also transportation routes from that region were at stake. Winter in the northern hemisphere also demonstrated its capacity to affect energy markets. Predictions of a major freeze led to a significant increase in energy prices, particularly natural gas prices.
GEOPOLITICS
Tensions with Iran
President Trump announced that he had ordered the USS Abraham Lincoln carrier strike group to head toward Iranian waters. The president commented that "maybe we won't have to use it," but that they were sailing in that direction "just in case." Iranian intelligence interprets the military movements ordered by Trump as a credible threat.
Some agencies report that Iranian Supreme Leader Ali Khamenei is hiding in an underground bunker in Tehran. The report indicates that his third son, Masoud Khamenei, handles daily office activities, while his other son, Mojtaba Khamenei, maintains contact with senior regime officials.
Russia-Ukraine Conflict
Although the Russia-Ukraine war sometimes seems to disappear from news headlines, the truth is that, one year after President Trump's inauguration and his promise to end the four-year-old conflagration, the conflict continues to claim lives and destroy infrastructure on both sides of the battle line.
The first three-way peace talks between Russia, Ukraine, and the United States concluded in Abu Dhabi without apparent progress. The two-day talks ended after waves of Russian airstrikes targeted Ukraine's energy infrastructure and a Ukrainian missile attack against energy infrastructure in Belgorod.
Situation in Kazakhstan
Kazakhstan's "Tengizchevroil" company halted production at its Tengiz and Korolev oil fields due to power supply problems caused by fires in two transformers. The shutdown forced the operator to declare force majeure; according to Reuters reports, the production interruption could last up to 10 days.
On the other hand, oil from the Kashagan field, also in Kazakhstan, has been diverted to the domestic market for the first time due to bottlenecks at the CPC terminal in Kashagan on the Black Sea, following severe damage to the terminal's equipment from Ukrainian drone attacks.
FUNDAMENTALS
OPEC+ Production Policy
At the beginning of the year, OPEC+ reaffirmed its commitment to keep production increases frozen in January, February, and March 2026 to offset low seasonal demand and high supply from countries outside the organization, according to its statement. This position is more than a tactical market-balancing measure given OPEC+'s limited short-term production capacity. Furthermore, any change in that strategy would undermine its closed production potential and weaken its influence on prices.
Russian Production
Regarding Russian oil production, Deputy Prime Minister Alexander Novak announced that production in 2025 decreased by nearly 1% to an average of 10.3 million barrels per day (MMBPD). This figure contrasts with OPEC secondary sources measurements, which estimate Russia's production at 9.3 MMBPD, representing a material difference in ongoing global overproduction estimates.
Winter Weather Impact
The extreme cold wave hitting the Northern hemisphere has driven up residential heating demand, affecting fuel prices, especially natural gas. On January 23, 2026, the price stood at $5.35/MMBTU, up more than 40% in one month. The weather situation is being closely monitored, as the phenomenon could disrupt oil and gas production due to facility freezing. Flight cancellations and road difficulties also impact liquid fuel consumption.
Inventories and Demand
Natural gas inventories, according to the Energy Information Administration (EIA), have dropped significantly. In contrast, commercial crude inventories increased by 3.6 million barrels (MMbbl), which reduces the climate's effect on prices, at least in crude's case.
While these uncertainties batter the supply side, demand appears to be consolidating to the point that the International Energy Agency (IEA) increased its oil demand projection for 2026 by 80,000 barrels per day (Mbpd), to 950,000 barrels per day.
The agency also notes in its latest report that supply growth did not materialize as predicted. In fact, global oil production decreased by 350,000 barrels per day in December, according to the IEA. And it wasn't the first monthly decline. The agency noted that December's total of 107.4 million barrels per day was 1.6 million barrels per day less than September's record. In other words, global oil production had been declining during the last quarter of 2025.
Oil Prices
So the oil market weighed all these changes and concluded that geopolitical pressure was worrisome enough to overcome concerns about supply excess. Thus, at Friday's close on January 23, Brent and WTI benchmark crudes traded at $65.88/bbl and $61.07/bbl, respectively, up 2.8% from the previous week.
VENEZUELA
DELCY RODRÍGUEZ, A BRIDGE OR A DEAD END?
In certain Caracas political circles, there is an attempt to draw an analogy between General López Contreras, Vice Admiral Wolfgang Larrazábal, and Mrs. Delcy Rodríguez. We are told that Mrs. Rodríguez, just like the 20th-century military figures, is the transitional figure who will allow Venezuela to leave behind the dictatorship of which she is part.
López Contreras and Larrazábal are figures of transition and opening from the military establishment toward civilian rule. Delcy Rodríguez is a figure of preservation and ideological ossification of the current civilian-military power, managing an apparent transition, supervised by external pressures: we do not yet know the result of that experiment, but the regime's performance in these years does not give much hope. It may be that Mrs. Rodríguez and her circle end up surprising us or, more likely, their own colleagues will discard them.
Economic Stabilization Phase
The political and economic events resulting from U.S. intervention continue to happen at an unusual speed. The so-called stabilization phase is underway, as announced by Secretary of State Marco Rubio. The disposal of floating crude inventories and ordinary production occurs as a result of restoring the export process. The financial flow called the "Chevron model," which private oil companies have used, appears to be normalizing.
PDVSA's production and accumulated inventories are being liquidated through large "traders" at the behest of the U.S. government. Vitol and Trafigura are already authorized and in full activity. Apparently, sales of this crude can be placed in various markets, including the U.S., Europe, and, ironically, China, although the latter is yet to be confirmed.
Financial Flow and Sovereign Funds
Income from the sale of PDVSA volumes is deposited directly into a protected account at the Central Bank of Qatar, from which it flows to Venezuela to two "Sovereign Funds" created to control the destination of funds. Meanwhile, income from sales managed by private oil companies (currently Chevron) is handled through private banking, with foreign currency equivalent to royalties, taxes, and the local component of costs and investments entering the foreign exchange market. The fact is that about $300 million of the total $500 million has already reached the BCV, resulting from the "supervised" sale of approximately 12 million barrels.
The effect of positive expectations, reinforced by the foreign currency inflows, allowed the differential between the official and parallel rates to narrow to 30%, as parallel market quotes fell by half. The effect should be reflected in goods prices and inflation.
Oil Revenue Projection
It is important to understand that 2026 revenues will increase due to higher production volume, about 130,000 barrels per day on average. But the most significant increase is due to the change in export destinations. All crude will be sold at market price, without the discounts or intermediation expenses that the Venezuelan regime used until now to circumvent sanctions. Total oil revenues for 2026 would be around eighteen billion dollars ($18,000 million) at today's prices, 70% higher than those of 2025.
Relations with International Institutions
In parallel, Treasury Secretary Scott Bessent announced that sanctions would begin to be lifted and that he would use his good offices to restore relations between the International Monetary Fund (IMF) and the World Bank (WB) with Venezuela. Relations with the IMF are of immense importance for the country's potential reconstruction. Still, they do not seem easy, despite the enormous weight the U.S. holds within this multilateral organization.
Indeed, International Monetary Fund Managing Director Kristalina Georgieva stated at the Davos meeting that the IMF is willing to support Venezuela, but needs its main shareholders to recognize the country's leadership and for legitimate authorities to request IMF assistance.
Georgieva, in an interview with Reuters, said that despite there having been almost no communication with deposed President Nicolás Maduro's regime since 2019, the IMF has been "closely monitoring the economy" of Venezuela to assess its trajectory; Venezuela is many years behind in delivering the information the Fund requires for its assessments. But, Georgieva stated, "we understand the pressing situation. If the opportunity arises to support the Venezuelan people, they can be sure that the IMF will be there."
The official maintained that she is concerned that 8 million Venezuelans have fled the country in recent years, a proportion of the population greater than Ukraine's emigration due to Russia's invasion, which has drastically reduced the country's economy. "Inflation is rebounding. We are concerned that hyperinflation will reappear in Venezuela," Georgieva stated.
Earlier Thursday, IMF spokesperson Julie Kozack said in a regular briefing that the IMF would follow the same protocols for engagement with other countries that have experienced irregular changes of government and would assess whether countries with majority votes recognize Venezuela's government as legitimate.
Reform of the Organic Hydrocarbons Law
Another surprising development was the presentation of the modification to the Organic Hydrocarbons Law to the National Assembly, apparently one of the requirements the White House made of Delcy Rodríguez. The law was approved with more difficulty than glory in the first "discussion" and is now ready for "public consultation" and discussion of each article before formal approval.
The law seeks, in principle, to modify articles of the current 2006 law that hinder private investment. Perhaps the most important change from Hugo Chávez's 2006 law is the recognition that private companies can carry out primary activities (exploration and production) both through Joint Venture schemes and through production-sharing contracts, and the relaxation of the articles that prevent these investors from operating directly.
However, the reform maintains, even in what it seeks to make more flexible, a high degree of State discretion. Similarly, in other fundamental aspects, such as the level of royalties per project and crude marketing, as well as potential sanctions on private parties, the State establishes itself as a discretionary barrier and thereby opens the door to influence peddling and corruption.
In sum, although applauded by many economic sectors, the proposed reform is a timid attempt that we do not believe will resolve the problems of exacerbated statism that led to the sector's destruction. It is also striking to observe that the political opposition does not participate, by design or absence, in this discussion, one of the most important of all, leaving a space that will later be very difficult to reclaim.
Human Rights and Political Transition
A key and worrying aspect of the accelerated political process underway is the continued violation of human rights. It is impossible to imagine a real transition under repression, censorship, and opacity. The mass release of political prisoners announced by Jorge Rodríguez has not been as expected; it has been drop by drop, and those released have not regained their freedom, as they are subject to precautionary measures of appearing before courts, prohibition from leaving the country, and limitations on speaking freely. No less important is the continued violation of the rights of political exiles, who, by definition, are excluded from designing the country's future.
Uncertainty About the Transition Process
The main uncertainty in most Venezuelans' minds is the lack of clarity about the path to a genuine transition to a legitimately elected government. Some observers maintain that the process will be relatively quick, as the White House seeks tangible results before the midterm elections, when control of both chambers of Congress is at stake. On the other hand, there are comments that U.S. supervision could last for years due to the lack of concrete announcements about the democratization process following Trump's meeting with María Corina Machado.
We must wait for events to unfold; not even a month has passed since they deposed Maduro, and the "express channel" of the economy has yet to be traversed. Now is the time to recover fundamental freedoms, indispensable to deposing tyranny and legitimizing the republic.
OIL OPERATIONS
Return to the International Market
Venezuelan crude is returning to oil markets without the sanctioned connotation. Trading companies Vitol and Trafigura are in charge of reestablishing routes to Europe: the tanker Poliegos has loaded 1 million barrels for Italy, while, in parallel, they supplement the volumes that Chevron has been supplying to refineries on the Gulf Coast of America, selling crude to Valero and Phillips, among other refining companies.
Operational Activities
Operational activities are returning to a tense normality by reducing inventory levels, and work is underway to restore closed production. As expected, the response is slower in the Orinoco Belt fields.
International Contractors
International service contractors are preparing for increased activities, initially from licensed companies and, eventually, from those who decide to invest in country risk, such as Venezuela's. SLB CEO Olivier Le Peuch said the company is well-positioned to rapidly expand its business in Venezuela, given its role as the only international oil services provider with an active operational presence in the country, providing services to Chevron under that company's license. Halliburton has stated the same.
Production Figures
This week's production was 854,000 barrels per day (Mbpd), geographically distributed as follows:
West: 240 Mbpd (Chevron: 102 Mbpd)
East: 112 Mbpd
Orinoco Belt: 502 Mbpd (Chevron: 124 Mbpd)
TOTAL: 854 Mbpd (Chevron: 226 Mbpd)
Refining and Export
In domestic refineries, 220 Mbpd of crude and intermediate products were processed, yielding 76 Mbpd of gasoline and 62 Mbpd of diesel.
There is no official information on exports; we can only estimate that approximately 12 million barrels from accumulated inventory (380 Mbpd) were shipped through "traders," along with 200 Mbpd of fresh production, and that Chevron transported 180 Mbpd to the U.S., for a total of around 760 Mbpd. We estimate that the average price achieved is close to $51/bbl.
¹ International Analyst
² Nonresident Fellow Baker Institute
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