M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
The fragile ceasefire in the Middle East finally collapsed, sending Brent crude above $100/bbl during the week. Renewed U.S. escalation in response to Iranian attacks on shipping led to 14 consecutive days of strikes against military installations, missile and drone depots, and the civilian infrastructure that underpins Iran’s military network. At the same time, Houthi rebels revealed their intent to disrupt shipping in the Red Sea. As a result, the difficulty of navigating the region’s two strategic straits, Hormuz and Bab el-Mandeb, is heightening the risk of a supply chokepoint from the region.
Adding to this scenario was the reimposition of the U.S. blockade in the Gulf of Oman against vessels linked to Iranian ports, deepening uncertainty in a market that remains highly vulnerable. The United States expects that the sustained dismantling of Iran’s and its allied groups’ military capabilities will reduce, or even eliminate, Iran’s ability to control these shipping lanes. So far, however, there is no evidence of concrete progress toward that goal. Trump also threatened “major military punishment” against Iran and the Houthis in the event of further attacks on shipping, threats that so far have proven largely ineffective.
The energy market was also affected by disruptions at Russian refineries stemming from Ukrainian attacks. These long-range drone strikes have weakened the internal fuel-supply system for Russian troops, reduced the country’s capacity to export petroleum products, and further eroded Russia’s political and financial standing in the war.
Once again, President Trump is trying to act as conductor on the geopolitical stage, but neither is the score clear, nor are all the musicians following his baton.
Geopolitical Fundamentals
The threat of a prolonged disruption to oil and LNG supply could have a significant impact on the oil market and, even more so, on the global economy. World Bank Chief Economist Indermit Gill told Reuters he now expects the global economy to grow just 1.3% this year, down from 2.9% last year. This effect works through several key channels:
● Simultaneous blockage of critical routes: the combined disruption of the Bab el-Mandeb Strait in the Red Sea, from Houthi attacks, and the Strait of Hormuz in the Persian Gulf, due to the conflict with Iran, would compromise two of the main arteries of global crude trade. Together, these two passages carry a substantial share (23 million barrels per day) of the oil shipped from the Persian Gulf to Europe, North America, and Asia, as well as 20% of global LNG volumes.
● Reduced ability to reroute: if the Bab el-Mandeb Strait were rendered unusable, Saudi Arabia would lose the alternative route it currently relies on as its main export outlet amid the Iranian blockade of the Strait of Hormuz, forcing vessels to sail around the Cape of Good Hope.
● Rising logistics and insurance costs: reinstating blockades on Iran-linked vessels and the continuation of attacks would sharply raise war-risk premiums for tankers. On top of that, longer voyage times from seeking safer routes would drive an immediate increase in the final price per barrel due to higher transport costs, even without an equivalent drop in physical crude output.
● Psychological effect and greater market volatility: oil markets react with particular sensitivity to scenarios of geopolitical uncertainty. A direct conflict combining large-scale attacks with physical disruptions to maritime transit could trigger a supply shock, both real and speculative, along with a drawdown in global inventories, pushing oil prices to exceptionally high levels and adding to inflationary pressure on the global economy.
Even so, neither strait is fully blocked today. Some tankers have managed to navigate them by switching off their transponders to reduce detectability. By contrast, the blockade imposed by the United States in the Gulf of Oman has been stricter. Under that policy, U.S. authorities detained the merchant vessel M/T Lavine after it attempted to evade the blockade on at least four occasions, U.S. Central Command spokesman Captain Tim Hawkins told the Associated Press. This is the second merchant vessel detained since the U.S. military reinstated the measure, while other tankers reportedly abandoned attempts to make the crossing.
Adjustments in the Crude Market and Nuclear Deal With Saudi Arabia
Against this backdrop of uncertainty and geopolitical risk, U.S. crude has seen significant demand since fighting began in late February, partly due to its location outside the conflict zone. That said, overseas shipments had eased somewhat after the brief reopening of the Strait of Hormuz allowed some tankers held in the Persian Gulf to resume course toward Europe and Asia.
Along the same lines, during the visit of Saudi Crown Prince Mohammed bin Salman to the White House, it was announced that Washington would approve a nuclear deal with the kingdom that could allow it to enrich its own fuel for civilian reactors. Any agreement granting Saudi Arabia access to nuclear technology could prove controversial, both domestically and across the wider Middle East, since the ability to enrich nuclear fuel could, in theory, eventually lead to the development of nuclear weapons. Shortly after the announcement, however, President Trump wrote on social media that the deal would be conditioned on the Saudis signing the Abraham Accords — something Riyadh has never been willing to do unless Israel recognizes a Palestinian state.
At the same time, production constraints in Kazakhstan, a traditional supplier to Mediterranean and northwest European refineries, together with reduced Russian exports, have led many refiners to increase their purchases of crude from the Americas. Despite this, U.S. production has held relatively steady, while the rebound in drilling-rig and fracking-crew activity seen over the past two months has lost momentum.
Diplomacy: Rubio’s Meetings With China and Russia
During the week, U.S. Secretary of State Marco Rubio held key bilateral meetings with both Chinese Foreign Minister Wang Yi and Russian Foreign Minister Sergei Lavrov, on the sidelines of the ASEAN foreign ministers’ meeting in Manila. The bilateral meeting with Wang Yi focused on managing the deep tensions between Washington and Beijing ahead of President Xi Jinping’s visit to the United States. Rubio acknowledged “major differences” on trade and geopolitical issues that will persist, but both diplomats described the conversation as constructive and pragmatic in seeking to avoid misunderstandings.
The meeting took place against the backdrop of a recent, tense maritime clash between Chinese coast guard vessels and Philippine forces. Rubio firmly reaffirmed U.S. support for Manila and noted that the United States will rigorously honor its obligations under the mutual defense treaty.
Separately, the meeting with Sergei Lavrov lasted just over half an hour and focused mainly on reopening diplomatic channels to resolve the conflict in Eastern Europe. Rubio went into the meeting intending to explore avenues for dialogue and revive the idea of Washington acting as mediator to end the war — a campaign promise made by President Trump.
In the meeting, Lavrov repeated arguments Rubio had already heard on numerous occasions, both regarding the reasons for the current situation and the unacceptability of continued U.S. arms supplies to Kyiv. Rubio stressed that both powers hold the world’s largest nuclear arsenals and that breaking off dialogue would be irresponsible and reckless.
Price Dynamics
Global oil prices swung notably but maintained an upward trend. Brent crude broke through the psychological $100/bbl barrier midweek following a Houthi attack on Saudi tankers in the Red Sea.
Although prices eased slightly toward the end of the week, closing on Friday, July 24 at $96.78/bbl, for a weekly gain of nearly 9%. WTI, meanwhile, climbed above $92, closing Friday’s session at $89.31/bbl, a weekly gain of around 8%.
The new week opened with prices lower (Brent: $90.91/bbl) following news that fighting in the Persian Gulf had paused and that new diplomatic contacts were under way — this despite the Houthis launching attacks against Saudi Arabia.
VENEZUELA
A Never-Ending Story
One might have expected that, nearly seven months after Nicolás Maduro’s surprise departure and the start of what has been called Washington’s stewardship, there would be significant progress to report beyond the initial signals given. The reality is that reconstruction, the economy, and politics are stumbling along, straying from the original path of the three-phase plan — stabilization, recovery, and transition — which has not achieved the expected results.
Ineffective handling of the humanitarian crisis, disarray in exchange-rate policy that continues to feed stubborn inflation, new amendments to laws and regulations supposedly aimed at encouraging private investment but with doubts about their real scope and results, and the twists and turns of the transition to a stable, democratic government are turning into a story that goes in circles without moving forward.
The interim government appears to be trying to implement the changes overseen or imposed by the White House. Still, whether from haste, incompetence, or sheer local cunning, the end product falls short of its goals, even when presented in grandiose, propagandistic fashion.
Similarly, the Trump administration makes announcements that are clearly aimed at domestic political goals but do not faithfully reflect the country’s complex situation, hindering an accurate diagnosis and better decision-making.
Economic Situation
After the interim government was installed and changes to oil, mining, and electricity policy were rapidly implemented, annual growth of up to 10% was projected for 2026. But delays, discretionary decision-making enshrined in law, and the lack of institutional strength have steadily pushed that expectation further away. Now, given the severity of the earthquake damage, the expected growth appears to have evaporated entirely. It is telling that, despite the social needs of the country’s most populous areas, public spending has actually been cut — a complete contradiction.
Much has been said about the material damage caused by the double earthquake and about reconstruction over time. But not enough weight has been given to the humanitarian crisis stemming from the loss of family members and the abrupt change in the social fabric: little by little, thousands of people are coming to realize that everything has changed for them forever — conditions that do not show up in official statistics.
The combination of an unavoidable natural disaster and the government’s lack of preparedness to respond appropriately, compounded by a lack of empathy from a government focused on covering up its own shortcomings and projecting an image of diligence it does not have through political propaganda — going so far as to create bureaucratic obstacles that delay timely responses and international aid — is beginning to carry a high political cost.
At the same time, revelations that many of the homes that collapsed were government-built housing projects — awarded, on top of grotesque cost overruns, to inexperienced companies hand-picked without competition, which never accounted for soil conditions or mandatory compliance standards — have sparked enormous public anger, a sense of helplessness, and psychological harm among the thousands of victims that will take a long time to come to terms with.
Institutional Crisis Management
The political landscape remains heavily focused on responding to the infrastructure and housing emergency following the earthquakes. The need for funding has forced the interim government to work closely with multilateral organizations and private banks.
U.S. Secretary of State Marco Rubio said Washington is working to facilitate Venezuela’s access to international financing and credit for reconstruction. At the same time, the International Monetary Fund (IMF) announced the release of $346 million in Special Drawing Rights (SDRs) to the country’s reserves to address immediate priorities. The political opposition has voiced concern over the lack of transparency in how an untrustworthy public administration might manage those funds.
Also, starting in August, meetings will begin between representatives of the 2015 National Assembly, chaired by Dinorah Figuera, and the current one, chaired by Jorge Rodríguez. The initiative was initially seen as far-fetched, but in the face of opposition objections, Marco Rubio now acknowledges that other political parties, especially María Corina Machado’s, will need to be part of the process. Preliminary contacts are taking place in Spain, and according to Marco Rubio and Dinorah Figuera, the initial goal is to achieve an impartial National Electoral Council whose decisions cannot be undermined by a biased judiciary, with new magistrates to be appointed as part of the process to form a balanced Supreme Tribunal of Justice. Seeing will be believing.
On July 26, María Corina Machado and Edmundo González stated these negotiations:
“We will not stand in the way of any initiative that produces real progress. We will judge it based on concrete, verifiable achievements: the restoration of democratic institutions, the release of all political prisoners, real guarantees for all actors without exclusions, a timely presidential electoral calendar, and full respect for popular sovereignty.”
Private Investment, Accelerating Deals
President — now without the “acting” qualifier — Delcy Rodríguez announced that the executive branch is formally negotiating around 30 specific investment agreements with the international private sector, building on the guidelines and memoranda signed earlier this year with major corporations such as Chevron, Repsol, ENI, Shell, Maurel & Prom, IMSA, and General Electric. Meanwhile, nearly 20 Production Participation Contracts (CPPs) are being suspended, at least temporarily, for failing to meet the new legal requirements, according to unofficial sources.
According to the government and media reports, following the recent enactment of the regulations to the Organic Hydrocarbons Law — which reduces the royalty and Integral Tax burden on operators to a range of 20% to 35% and introduces certain income-tax-related provisions — private companies are showing increasing interest.
Amid this supposed energy opening, companies such as Lionheart Capital, Hunt Oil, Nabep, Pacific Coast Energy, Brazil’s Batista brothers, and others are negotiating frantically to meet the July 28 deadline.
The case of Pacific Coast Energy stands out. It could affect participants’ perception of legal security in the opening, since the associated asset, the joint venture PetroDelta, was awarded after the revocation of the stake previously held by partner “B,” DP Delta Finance BV. That company, or its predecessor entities, has operated under various contractual arrangements over these assets since 1992 and considers itself to have been expropriated without real cause. Something similar is occurring at the PetroCabimas joint venture, though the details are not yet public.
In any case, the articles appearing in the press and media forecast outsized production growth, in line with the announcements PDVSA has been making for years that have never materialized. As such, despite all the announcements, we are maintaining our national production forecasts of 1.06 MMbpd by year-end 2026 and 1.46 MMbpd by year-end 2028.
Additionally, global refiners are resuming direct crude purchases to bypass intermediaries.
Operations Oil
As July 2026 draws to a close, oil production held relatively steady, despite increased activity aimed at reducing deferred production. Output totaled 962 Mbpd, distributed geographically as follows:
West: 276
East: 110
Orinoco Belt: 576
TOTAL: 962
Two workover rigs were activated at PetroZamora, and another continued recovering wells in Urdaneta Oeste. In the Orinoco Belt, two additional workover units are also operating. The PetroPiar upgrader in José appears to have shut down due to a power outage that may have affected the blending plants, though this could not be independently verified.
Domestic refineries processed 282 Mbpd of crude and intermediate products, yielding 90 Mbpd of gasoline and 84 Mbpd of diesel. The volume increase reflects the El Palito refinery.
In the petrochemical sector, a storm caused a power outage that knocked out the methanol and fertilizer plants. No changes were reported at the El Tablazo and Morón complexes.
Preliminary export data for July 2026 point to 950 Mbpd.
The rise in international prices, driven by the resumption of the war in the Strait of Hormuz and Bab el-Mandeb, was reflected in the Venezuelan basket, which averaged $70.9/bbl.
[1] International Analyst
[2] Nonresident Fellow, Baker Institute
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