M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
The global oil market is disoriented and nervous because relations among the United States, Iran, and other less direct actors have turned into a poker game: a competition over who “bluffs” better. The world watches the propaganda from both sides but does not know how much weaponry the parties still have or what their political and/or economic needs are to reach a sustainable, over-time negotiated agreement.
Analysts try to decipher the contradictions in the numerous messages from President Trump, which oscillate between threats of new attacks and promises of an early peace. On the Iranian side, it is no less confusing: some officials seek local solutions for transit through the Strait of Hormuz, while others, more belligerent, want to intensify the blockade of the strait even further. The Iranian Parliament is discussing a bill to permanently prohibit the passage of U.S., Israeli, and other hostile countries’ vessels through the Strait of Hormuz; meanwhile, the United States maintains a blockade on vessels carrying oil and related goods associated with Iran.
After months of strangulation of passage through Hormuz due to hostilities, mainly American and Iranian, a maritime corridor managed by Oman is now being negotiated. Nevertheless, Tehran’s proposals to charge tolls of 5% to 7% and to veto vessels from “hostile” nations keep cargo insurance costs on maximum alert and, obviously, do not enjoy the approval of the United States. In parallel, the conflict in Gaza, which seemed to be approaching a ceasefire after Trump’s proposal to Hamas, has derailed again in the face of Israel’s rejection of that disarmament and troop-withdrawal plan.
Unlike the Middle East, where the flow of produced crude and gas is being halted, the impact of the Eastern European front is concentrated on refining capacity and processed products. Through the intensive use of long-range drones, Ukraine has successfully bombed Russian refineries, taking between 30% and 50% of Moscow’s processing capacity out of service. The loss of infrastructure has forced Russia, a historic net exporter, to cut its external diesel sales drastically and even import gasoline cargoes to meet domestic demand, thereby straining international clean-fuels markets.
The complex superposition of two major foci of armed conflict—the open war in the Middle East (with direct implications for the maritime transit of crude) and the prolonged technological attrition campaign on the Russo-Ukrainian front—is an explosive combination. China has consolidated its position as the great strategist and buffer of the global oil market, positioning itself at an advantage amid the current conflicts in the Middle East and on the Russo-Ukrainian front.
Petropolitical Fundamentals
The global oil market has been characterized by high volatility, with Brent crude oscillating by ±$5/BBL. This oscillation reflects the complex superposition of the two major armed conflicts that increasingly show signs of interconnection, at least in the supply of weapons and in the shared intelligence between Iran and Russia.
The crisis in the Strait of Hormuz and the Gulf of Oman represents one of the greatest physical disruptions to the global energy supply in recent years. The increasingly uncertain possibility of transit through the strait, due to Iranian harassment of vessels, combined with the U.S. blockade of Iranian trade in the Gulf of Oman, continues to affect the supply of oil and liquefied natural gas to Asia and Europe, as well as the economies of the region, particularly the Iranian one.
The supply of Iranian missiles and drones appears to be uninterrupted. At the same time, U.S. armament inventories show signs of pressure due to the duration of the bombing campaigns against Iran and the interception of weaponry directed against military bases and naval units in the area. This intermittent war has damaged more than 40 key energy assets in the region. It has sustainedly reduced more than 1.2 million barrels per day of refining capacity in the Gulf, with recovery that could take nearly two years.
In parallel, Iran and Oman have reached a preliminary agreement to establish a temporary 60-day maritime corridor in the Strait of Hormuz to reopen commercial traffic and alleviate global energy tensions stemming from the blockade of this strategic waterway. Commercial and security negotiations between Tehran and Muscat are in their final drafting phase. The regulatory framework of the agreement contemplates two priority routes: an entry corridor to the north, through which commercial vessels entering the Persian Gulf would transit Iranian territorial waters under Tehran’s operational control; and an exit corridor to the south, through which vessels leaving the Gulf would navigate a route close to Omani waters, under joint supervision by both countries.
Regional sources indicate that this provisional emergency route does not contemplate charging tolls or additional fees to shipping companies, even though charges intended to benefit Oman and Iran were initially considered. Iran’s Ministry of Foreign Affairs, through Kazem Gharibabadi, indicated that the bilateral agreement does not, by itself, guarantee full security or permanent reopening if interference from third parties persists.
Consequently, the real effectiveness of the commercial reopening continues to depend on the United States and Iran reactivating their respective memoranda of understanding after the mutual naval blockades.
At the same time, global crude inventories remain at extremely low levels, around 7.8 billion barrels. Tanker freights in the region have increased significantly, while global refining capacity is insufficient to meet demand, as reflected in high refining margins. The deficit of refined products such as diesel, gasoline, and aviation fuel has progressively worsened due to events on the Russian front.
Ukraine again attacked Russian refining infrastructure; this week, its drones severely damaged key complexes, including the Slavneft-YANOS facilities in Yaroslavl, Bashneft-Novoyl in Bashkortostan, and the Volgograd refinery operated by Lukoil, which forced temporary production suspensions. The cumulative economic impact of Ukrainian attacks against Russian refineries exceeds $13.5 billion in losses.
China, taking advantage of the massive stockpiling of strategic inventories undertaken in previous years and its accelerated transition toward clean energy, has managed to mitigate the most severe effects of the international energy crises. On the one hand, it reduced its imports when Persian Gulf crude was unavailable; on the other, it secured the supply necessary to maintain high refining levels, which allowed it to increase its exports of refined products and, when necessary, reduce its imports, effectively becoming the new swing factor.
In this context, China also became the main buyer of discounted Russian crude, both via pipelines and through Russian ports in Asia. In addition, it managed to negotiate with the Houthis of Yemen the exit of vessels from the Red Sea loaded with Saudi crude. In parallel, it has deepened the use of the yuan to settle its oil purchases with Iran and other sanctioned partners.
However, given the uncertainty in the schedules of cargoes originating from the Persian Gulf, as well as the uncertainty that Chinese refineries still face in their programming and processing of Middle Eastern crudes, it is likely that they will end up exporting volumes considerably lower than those permitted, according to a statement by an executive of the state oil marketing company.
For its part, oil activity in the United States remains timid. Drill and hydraulic-fracturing execution activity levels remain relatively low and are trending downward. Crude production has stabilized at around 13.8 million barrels per day, forcing the country to increase its crude imports to maintain high refining rates.
Although the International Energy Agency (IEA) forecasts a recovery in demand for the second half of the year, it notes that, relative to 2025, global demand will fall by 1.0 million barrels per day in 2026, marking the first annual decline in consumption since the COVID-19 pandemic. On the other hand, OPEC does not foresee demand destruction but rather slower growth. Nevertheless, once normality is restored in the Middle East, a 2 MMBPD rebound in demand, repressed by supply complexities, is expected.
A regional item of interest is the inauguration of Abelardo de la Espriella as Colombia's new president. With this change, South America’s “pendulum swing” toward the right continues. In his inaugural address, de la Espriella confirmed a shift in mining-energy policy relative to the previous government by announcing that his administration will authorize the development of “fracking” to address the country's growing energy deficit. In the past, political and social opposition has prevented identification of the true potential and eventual exploitation of shale resources.
Oil and Natural Gas Prices
During the week, global energy markets saw declines in both crude and natural gas prices, driven by hopes of a diplomatic solution to the Middle East conflict. The oil market closed with its second consecutive weekly loss. Midweek, it broke key support levels in response to announcements of negotiations to reopen commercial maritime routes. The expectation of a return to the market of millions of barrels held back in the region alleviated fears of a global shortage. Although these announcements looked unconvincing, the market considered them valid.
Another factor, more psychological than real, contributed to the deceleration of prices, as an increase in U.S. commercial inventories was recorded. Brent crude began the week above $85/bbl and fell sharply on Tuesday and Wednesday, dropping below the $80/bbl barrier for the first time since July. After some volatility toward the weekend, it closed on Friday, August 7, at $83.55/bbl. WTI crude showed the same trend, falling from $81.96/bbl to $78.18/bbl at Friday’s close.
On the other hand, natural gas experienced strong downward pressure and touched its lowest level in more than three months. September futures contracts on the NYMEX, which averaged near $2.76/MMBtu at the beginning of the week, fell to a low of $2.62/MMBtu. On Friday, August 7, with a slight technical correction driven by opportunistic buying, prices closed at $2.67 USD/MMBtu.Dry gas production in North America remained at historically high levels, averaging 110.6 billion cubic feet per day (bcfd). At the same time, demand for liquefied natural gas (LNG) exports was slightly reduced due to maintenance work at key terminals, such as Freeport LNG in Texas.
The Energy Information Administration (EIA) reported an increase of 33 billion cubic feet (BCF) in storage during the week. This figure exceeded both analysts’ expectations and the 5-year moving average. In Europe, natural gas prices recorded a slight weekly decline of 2.5%, and the benchmark contract (Dutch TTF) closed the week at €55.54/MWh, with spot prices peaking at €59/MWh.
Despite the second consecutive week of declines amid attempts at diplomatic détente in the Near East, the market remains in a state of extreme structural fragility, with prices significantly elevated relative to last year. Short-term expectations depend entirely on the success or failure of diplomatic negotiations among the United States, Oman, and Iran. Any rupture of the current fragile understandings would again push barrel prices above the $90–100/bbl mark; the same trend would be repeated in gas in Europe and Asia.
VENEZUELA
THE POLITICAL TRANSITION RETURNS TO THE FOREFRONT
The primary intention of the United States after January 2026 has been to promote the accelerated development of a hydrocarbon-based economy that would lead to a political transition. However, institutional weakness, together with the opaque and discretionary processes of the interim government led by Delcy Rodríguez, has slowed and even paralyzed the process.
The investment levels necessary to reactivate the hydrocarbon industry, reach its true potential, and thereby drive the rest of the economy require an environment of political stability and legal certainty that those who hold power temporarily can not create.
When investors learned of the steps of the plan attributed to Marco Rubio—centered on stabilizing, recovering, and transitioning toward a government elected by the people—they expected a clear roadmap and a defined timeline to reach the long-awaited transition. Unfortunately, that phase of the plan has not received the same impetus as the other two, and time has shown that the three phases are not only not strictly sequential but are deeply interdependent.
The results achieved to date satisfy neither the expectations of the Venezuelan population, which is living through a deep crisis, nor those of the Trump Administration, particularly regarding the promise of a rapid recovery of the hydrocarbon industry. After the obstacles and the lack of significant results in the first two phases, it appears that the White House has finally considered it indispensable to advance with the political transition.
The scheme selected by Marco Rubio’s team appears to be a compromise among different visions, promoting a negotiation-dialogue table composed of representatives of the National Assembly of 2015 and of the National Assembly currently in office, led by Dinorah Figuera and Jorge Rodríguez, respectively. The first meeting of that table was held in Caracas under strict confidentiality, without the press present and with a somewhat diffuse agenda.
Fundamental issues, such as the appointment of a new National Electoral Council (CNE) and a new Supreme Court of Justice (TSJ), the release of political prisoners, guarantees for the exercise of parties' political rights, and full freedom of expression and information, were not explicitly included. It is expected that these topics will be addressed and that any agreement will include an execution timeline to prevent this initiative from becoming another mechanism the regime uses to buy time, as on numerous previous occasions.
The agreement on the first day was to declare themselves in permanent session until next Wednesday, August 12, the date on which they will evaluate progress and decide whether to extend the dialogue rounds, with the commitment to inform the country of the agreements reached periodically. There is no doubt that attention to those affected by the earthquakes, included on the agenda, constitutes an immediate priority. However, some analysts believe this is nothing more than a strategy to get the regime to access funds frozen by sanctions.
Emergency attention to the victims, as well as economic recovery and growth of the oil industry, can and must advance in parallel. The interim government forecast accelerated production growth during 2026 and 2027, reaching as high as 1.5 MMBPD. However, as the months advance, production appears to be stagnating. Moreover, as the inventories accumulated at the end of 2025 are exhausted, hydrocarbon export revenues are likely to decline starting in August, increasing pressure on the economic stabilization process.
The scheme of depositing all oil revenues into a U.S. Treasury-controlled account to prevent improper use of funds is being questioned by various sectors in both Venezuela and the U.S. Congress. The main source of distrust is that, if KPMG is auditing the accounts, as has been claimed, it is not clear why the results of that audit have not been made public or, at least, shared with members of the United States Congress.
Another relevant source of uncertainty in the opening of the hydrocarbon sector is the discretionary process of block allocation, which, on occasion, is awarded simultaneously to several companies. Long-standing joint ventures have been reassigned to companies whose preparedness for the required activity is questionable, displacing others who had for years operated or actively participated in those projects.
Likewise, other aspects of the process of adapting existing contracts to the new hydrocarbons law and its regulations have evidenced a lack of transparency, which has limited the formulation of concrete investment plans. In summary, it is a process of limited opening to private capital that, to date, has only resulted in maintaining the production potential of established companies that, incidentally, recover outstanding debts with PDVSA. Achieving accelerated production growth requires implementing the oil recovery process in an institutionalized, transparent, and competitive manner.
The Venezuelan economy continues to face persistent inflation, low purchasing power, and scarcity of essential goods. 88% of the population lives in multidimensional poverty and approximately half in extreme poverty. In addition, public-service infrastructure such as electricity, water, and health remains collapsed, which hinders the daily life of Venezuelans and the growth of the Venezuelan oil industry.
This entire swarm of problems is due to failed policies applied over a prolonged period by Chávez and Maduro. Now, under the interim government, despite much higher revenues, the economy has not stabilized due to its uncoordinated policies.
A combination of decisions and officials that has already proven ineffective is maintained. Annualized inflation continues in triple digits; the bolívar continues to depreciate, closing at 757.5 Bs./$, while the alternative rate reached 861.5 Bs./$, with a gap of around 14% that, although with a downward trend, has proven difficult to control.
Oil Operations
Power cuts and electricity rationing have marked the first week of August: a structural problem without an easy solution. Apparently, there is an initiative to recover some thermal generators, which could have a positive effect in a relatively short period.
Average production for the week was 961 Mbpd of crude, distributed geographically as follows:
• West 274
• East 109
• Orinoco Belt 578
• TOTAL 961
In the national refineries, 258 Mbpd of crude and intermediate products were processed, with gasoline and diesel yields of 78 and 79 Mbpd, respectively.
The José Petrochemical Complex maintained utilization of its methanol and ammonia/urea plants at 76% of capacity, constrained by natural gas availability.
At the close of July, an average of 882 Mbpd of crude and 51 Mbpd of residual fuel had been exported. This reduction relative to previous months is due to the lower availability of stored crude.
The destinations of the exports were the United States (639 Mbpd), India (135 Mbpd), and Europe (106 Mbpd). The segregations exported were: Merey-16, 620 Mbpd (due to the use of a greater quantity of heavy naphtha in the blend); Boscan, 138 Mbpd; Hamaca, 91 Mbpd; and Blend 17, 33 Mbpd.
The price of the Venezuelan basket declined slightly, in line with international prices, to an average of $72.8/bbl.
[1] International Analyst
[2] Nonresident Fellow, Baker Institute
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