M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
The energy market situation, far from stabilizing, remains highly volatile, driven by the conflict between the United States and Israel, on one side, and Iran, on the other, as well as by the escalation of tensions and blockades in the Strait of Hormuz. Added to this are the continued attacks on Russian refineries and infrastructure in the Black Sea, within the context of the Russia-Ukraine conflict, along with the widespread tightening of migration policies in the European Union and other relevant developments in the Western Hemisphere surrounding the so-called Donroe Doctrine(Monroe + Donald). For now, crude oil and natural gas prices are rising due to precarious inventories and uncertainty about the immediate future and negotiations in the Middle East.
Fundamentals
Global instability has remained largely unchanged from the previous week—both Iran and the U.S. claim to control the Strait of Hormuz. However, available data suggest a significant reduction in maritime traffic, with only 10 to 15 tankers per day compared to the roughly 100 that transited before the conflict.
The alternative route used by Saudi Arabia also carries risks, particularly when crossing the Bab el-Mandeb Strait, which provides access to the Red Sea for a significant share of its production. Following the expiration of the truce memorandum signed in June between the U.S. and Iran, the strategic environment appears to have changed substantially. The previous rules, agreements, and assumptions have lost validity, and the margin of uncertainty has widened considerably. July satellite records indicate that Iranian attacks and threats shifted part of the traffic toward territorial waters under Iranian control, away from the corridors protected by the United States and Oman in Omani waters.
President Trump once again shook up the international chessboard by announcing his intention to declare the Strait of Hormuz de facto “U.S. territory” in the event of a hypothetical Iranian military defeat. He also proposed a sequential negotiation scheme, under which Tehran would first have to accept the reopening of the strait and, subsequently, a review of its nuclear program.
As expected, Iran’s response was an outright rejection. The new military command appointed by Mojtaba Khamenei conditioned any reopening of the sea route on the lifting of Washington’s economic blockade, the release of frozen Iranian assets, and an end to hostilities in Gaza and Lebanon. All of this adds up to a stalled negotiation.
In parallel, Russia’s war against Ukraine continues to wear down both sides. The situation presents a paradox: relative territorial stalemate coexists with massive destruction, especially of energy infrastructure located on Russian territory. The most significant recent impact stems from Ukrainian air strikes that have seriously damaged Russian crude oil and petroleum product refining and transport facilities.
Among the most recent targets are refineries in Bashkortostan and Yaroslavl, as well as the Novorossiysk naval base, described by President Zelensky as the “last major bastion of Russia’s Black Sea fleet,” where Russian warships were hit. Russia, in turn, has stepped up bombardments of urban centers such as Zaporizhzhia using North Korean ballistic missiles. At the same time, Kyiv’s forces reportedly recovered 26 key localities in the southeast, particularly in Dnipropetrovsk and Donetsk.
Intelligence sources warn that Moscow is training a contingent of between 30,000 and 50,000 North Korean soldiers for a large-scale offensive in the fall.
IMPACT ON ENERGY
The combined impact of both conflicts on the oil market is significant and multidimensional. The most relevant consequence is reduced supply of crude oil, refined products, and liquefied gas from the Middle East. For crude oil and refined products, we estimate the market is losing about 2.0 million barrels per day and 700,000 barrels per day, respectively.
Added to this is the Russian effect, which further complicates global balances due to logistical restrictions on crude oil exports and the drop in diesel and gasoline exports, increasing pressure on the global refining system. The rest of the world has contributed only marginally to offsetting the tightening of supply from the Persian Gulf. So far, only Brazil and Canada have recorded significant production increases.
Nevertheless, global crude oil inventories appear to remain relatively stable, which could reflect a cyclical reduction in demand. This appears to be the case for China, which seems to be moderating imports to avoid buying at high prices. Against this backdrop, oil demand forecasts are split mainly into two views:
The International Energy Agency (IEA) forecasts in its August 2026 report that global crude oil demand will undergo a historic contraction of 1.6 million barrels per day (MMbpd), bringing total consumption to 103.29 MMbpd. This represents an additional cut of 510,000 b/d compared to its July estimates. However, for 2027 it projects a strong rebound with global demand growth of 2.4 MMbpd.
The other view, OPEC’s, projects that global oil demand will grow by 580,000 barrels per day (Mbpd) year-on-year in 2026, following a slight downward revision from last month’s assessment. OECD demand is expected to decline slightly by about 40 Mbpd, while non-OECD demand will grow by about 600 Mbpd. Global oil demand in 2027 is expected to grow by about 2.2 MMbpd year-on-year, following an upward revision from last month’s assessment.
In the Western Hemisphere, the Trump administration’s foreign policy, the “Monroe Doctrine,” is beginning to take hold. Based on its National Security Strategy, Washington is seeking to eradicate Chinese and Russian influence in the Western Hemisphere. Following the overthrow of Nicolás Maduro in Venezuela, the focus of geopolitical pressure has shifted toward Cuba. In Latin America, deployment plans and military alliances (with Colombia’s recent addition) are being formalized to combat narco-terrorism through direct tactical interventions. This policy could translate into incentives for developing oil and gas production across much of the continent, as part of a process of diversifying supply centers—of course, with results in the medium and long term.
Oil Prices
All these geopolitical uncertainties and shifts have kept the hydrocarbons market off balance, as it tries to determine which geopolitical vector will prevail. Uncertainty increases perceived risk, and market price forecasts have moved accordingly: volatility and an upward trend. Meanwhile, global GDP growth expectations for 2026 have been lowered to 2.5%, according to the World Bank.
Brent crude began the week around $84.7/bbl and closed higher on Friday, August 14, trading at $88.52/bbl, with a weekly gain of nearly 6.0%. WTI crude followed an identical trend, rising from an initial $79.3/bbl to settle at $82.40/bbl at Friday’s close. This rally was slightly tempered mid-week by EIA reports showing an increase in U.S. commercial inventories, a variable that may be immaterial within the current global picture.
Natural Gas Prices
Natural gas prices showed different dynamics in the United States and Europe, strongly influenced by extreme heat waves and geopolitical supply tensions. In the U.S., natural gas futures posted their first cumulative weekly gain since June. Record temperatures, which exceeded historical averages in the southern and western U.S., drove up electricity consumption for air conditioning. As a result, the Henry Hub benchmark closed the week between $2.73 and $2.76/MMBtu.
In Europe, the market showed strong volatility, reaching significant peaks before stabilizing by week’s end. Early in the week, the Dutch benchmark index (TTF) for the September contract jumped more than 6%, surpassing €58/MWh, and closed on Friday, August 14, at €60.72/MWh. Cargoes from Qatar failed to arrive, forcing Europe to compete aggressively with Asia in the spot LNG market. European Union natural gas inventories are at dangerously low levels for this time of year.
VENEZUELA
U.S. TUTELAGE ACCELERATES THE TRANSITION
Although experience suggests caution regarding expectations of achieving actionable results from the negotiations between representatives of the regime (AN2025) and the opposition (AN2015), the agreements announced by the negotiators offer some grounds for optimism.
Among the first steps planned is the announcement that the appointment of a new Supreme Tribunal of Justice will be moved up, in the hope that it will be composed of impartial jurists—a necessary condition not only for laying the groundwork for a genuine transition, but also for economic recovery. Given the tutelary role played by the United States in the current process and its explicit interest in promoting private investment, we assign this stage a reasonable probability of success, despite the negative results of the eight previous rounds of negotiation.
The permanent negotiating sessions, as planned, concluded with agreements announced by Dinorah Figuera and Jorge Rodríguez. A summary of the main commitments is as follows:
· Complete overhaul of the judicial system and restructuring of the TSJ. It was agreed to launch a new nomination process to renew and appoint all magistrates of the Supreme Tribunal of Justice (TSJ). The opposition delegation’s objective is to guarantee judicial independence and prevent legal obstacles to what has been agreed going forward.
· Nominations Committee: Both sides agreed to reform the TSJ’s Organic Law, as well as to expand and renew the Judicial Nominations Committee.
· Review Council: A parity council will be created to oversee evaluation criteria, credentials, and constitutional requirements for candidates.
· Timeline: According to spokespersons, the formal appointment of the new judicial authorities is expected in November.
· Recovery of Foreign Assets for Emergencies. Both delegations agreed to “concentrate joint efforts” on recovering Venezuela’s international gold reserves currently held by the Bank of England.
· Path to the Electoral Power, Political Guarantees, and Renewal of the CNE. The underlying political axis points to the appointment of a new National Electoral Council (CNE) by December to unblock the institutional crisis and schedule presidential elections with full guarantees.
· Political prisoners. Technical dialogue channels were opened to arrange and implement the progressive release of persons detained for political reasons. The interim government announced the release of 130 political prisoners. NGOs have confirmed that the process had begun; as of Saturday, they had identified 73 releases.
The Stubborn Economy
On the economic front, the TSJ’s Constitutional Chamber ruled on August 12 that Decree No. 5,414 was constitutional, through which the Executive Branch, headed by Delcy Rodríguez, declared a 60-day State of Economic Emergency. The stated purpose of the decree is to expedite the mobilization of financial resources to address the severe structural impact caused by the two earthquakes that occurred on June 24. However, one should remain skeptical about whether there are further objectives of social control.
The United Nations Development Program (UNDP) presented its Macroeconomic Report on Venezuela for the first half of 2026, projecting gross domestic product (GDP) growth of close to 6.5% for 2026, with annual inflation of 385%. Monthly inflation in July reached 20%.
According to the same UNDP report, the direct damage from June’s double earthquake is estimated at US$6.7 billion, equivalent to approximately 6% of GDP. It also reports that the natural disaster has left more than 20,000 people affected in temporary camps, generating a humanitarian crisis that has hurt the interim government’s popularity.
Added to this are the ongoing blackouts and severe electricity rationing, which have also generated social discontent and massive citizen gatherings outside Corpoelec offices (the state electricity company). This erosion of the government’s public approval is behind its insistence on recovering the gold held in England.
Local economists warn that, although August could show a slight slowdown, the persistent double-digit monthly depreciation of the Bolívar continues to erode real purchasing power. The official rate continued to depreciate, reaching 771 Bs./US$, while the parallel rate rose to 874 Bs./US$, keeping the gap close to 14%.
According to the interim government and its advisors, the country carries a historical debt estimated at US$240 billion. However, the unexpected US$70 billion increase in debt relative to previously reported figures (US$170 billion) has not been documented or explained and may correspond to an estimate suggested by Centerpoint Partners, advisors to the regime, without auditable support. In any case, Venezuela’s international creditors reportedly require that political and institutional legitimacy first be fully consolidated before moving forward with renegotiating the defaulted debt. Moreover, the realistic recalibration of oil projections based on this year’s observed performance does not support short-term debt restructuring.
Opening to Private Capital
Regarding the process of opening to private investment, the Government of Venezuela announced the signing of a definitive contract with the engineering firm IMPSA to reactivate, complete, and modernize the Tocoma Hydroelectric Plant, as well as optimize the Macagua Hydroelectric Plant, in Bolívar state. The goal is to add a total of 672 MW to the National Electric System. This direct award, although celebrated in Washington, has raised questions over its lack of transparency.
The allocation of production blocks to private investors does not appear to have been accelerated by the publication of the reformed LOH’s regulations. The reasons vary, ranging from legal ambiguity to excessive discretion and non-transparent procedures. In addition, the lack of stability and legal certainty that major oil companies require to invest large sums in the country remains an outstanding debt of the administration.
In what looks like a propagandistic and strategic move to counter the underwhelming results of the sector’s opening, the Venezuelan government announced that it signed macro energy agreements on August 14 with British Petroleum (BP), XRG (United Arab Emirates), and UCC Holding (Qatar) for the development and production of offshore gas fields, which complements the agreements already signed with Shell for the development of the Dragon field north of Paria and the first stage of development of the Loran-Manatee field shared with Trinidad. These new contracts refer to the development of the 2nd phase of Loran-Manatee and of the Cocuina-Manakin field. The technical reasons for developing Loran in two stages are unknown; preliminarily, it appears related to an interest in accommodating these “important” investors rather than the geological realities of the accumulation.
These contracts send an ambiguous signal about the oil sector’s opening. On one hand, they are governed by the Organic Law on Gaseous Hydrocarbons and carry reduced country risk, since most of the investment will take place outside national territory and the natural gas production will be entirely for Trinidad’s domestic consumption.
On the oil side, to date, the only relevant projects that have received public mention are: (1) Batista Brothers’ participation in PetroRoraima; (2) the announced return of ONGC as operator in the Orinoco Belt; (3) ENI’s announcement regarding the development of the exploration and production portion of its Junín 5 block in the Orinoco Belt, despite indications that ENI could be seeking to divest some or all of its Venezuelan assets; and (4) Harry Sargeant II’s reduced stake in NABEP, although the status of the OFAC license remains uncertain, and the news has brought forward Alejandro Betancourt’s (Derwick Associates) role as an intermediary between the U.S. and the interim government back into the spotlight.
In sum, the offshore natural gas projects for export to Trinidad appear to be well on track and could begin producing in the second half of 2027 in northern Paria and during 2028 on the Deltana Platform. In contrast, a lack of institutionality, transparency, and fiscal conditions—dependent on the executive branch’s discretion—will delay investments in the Oil Fields or force them to wait until stable political conditions are achieved. As a result, year-end 2026 production will vary very little from current levels.
Oil Operations
Blackouts and electricity rationing continued to be a determining factor in operations and have become a focal point for the regime. PDVSA Gas pledged to increase available gas volumes to meet demand from thermoelectric plants. The regime announced maintenance and the return to service of currently offline thermoelectric plants and, over the longer term, the recovery and maintenance of hydroelectric capacity.
One of the topics that generates the most comment among analysts is production levels, used as a proxy for whether or not the hydrocarbons industry is recovering. To put the production figures in context, let us refer to the figures OPEC publishes monthly based on so-called secondary sources (as opposed to official figures).
The accompanying chart compares OPEC’s figures with the estimates we produce each week in this publication. As shown, OPEC’s figures are always slightly higher than ours. One possible explanation for the difference is that OPEC’s reported volumes aggregate field production, the volume of imported diluent used for the extra-heavy crude from the Belt, and condensate volumes (hydrocarbons above 40 degrees API), which should formally be reported separately.
The chart also shows that the difference widens starting in February 2026. This larger gap relates to crude oil inventory accumulated between December 2025 and early January 2026. In other words, part of the inventory is being accounted for as production, especially volumes on tankers that have been recycled into the system and recorded as monthly production and exported over the past 7 months. We estimate that, starting in September, once inventories are depleted, the curves will tend to converge, leaving only the traditional difference due to the accounting of imported diluent and condensates as crude production.
In the week of August 8–14, 966 Mbpd of crude oil was produced, distributed geographically as follows:
West 276
East 109
Orinoco Belt 581
Total 966
National refineries processed 268 Mbpd of crude oil and intermediate products, with gasoline and diesel production of 81 and 79 Mbpd, respectively.
The José Petrochemical Complex maintained utilization of its methanol and ammonia/urea plants at 68% of capacity, limited by natural gas availability.
Exports in mid-August point to about 720 Mbpd of crude oil.
The Venezuelan basket, reflecting international price movements, averaged $74.1/bbl.
[1] International Analyst
[2] Nonresident Fellow, Baker Institute
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