WEEKLY OIL REPORT
Week of 11 to 17 August 2020

PRICE

In the first half of August, oil prices continue their trend towards the gradual recovery that began in May, when OPEC+ production cuts¹ came into effect, remaining, since June 5, 2020, above the threshold of $40 per barrel. This recovery has also been influenced by the fall in production in OECD countries such as Canada and the USA, the gradual recovery in demand led by China and the rest of Asia, and the drain on inventories.

OIL PRICES (MARCH-AUGUST 2020)

At the close² of the day on Monday, August 17, the benchmark Brent and WTI rates were $45.32 and $42.44 per barrel, respectively.

After the entry into force of the OPEC+ cuts, prices have recovered: the Brent reference rate at 68% and the WTI reference rate at 112% in relation to the prices registered on May 4.

BRENT PRICE (MAY-AUGUST 2020)

WTI PRICE (MAY-AUGUST 2020)

The Behavior of Oil Price during the Week

On Friday, August 14, Brent and WTI references were quoted³ at $44.84 and $42.11 a barrel, respectively, continuing last week’s recovery, although references are still 32% below the prices of early 2020, when Brent was quoted⁴ at $69 a barrel and WTI $61 a barrel.

The average price of the OPEC basket for July is $43.42 per barrel, which is 15% higher than that reported at the end of June⁵ the highest recovery since February 2020, according to OPEC. On Monday, August 17, the basket was quoted⁶ at US$44.62 per barrel, an increase of 144% compared to that recorded on May 4, 2020.

OPEC BASKET PRICE (MAY-AUGUST 2020)

OPEC, in its «Monthly Oil Market Report» (MOMR), published⁷ on Wednesday, August 12, highlights the ongoing recovery of oil market prices during May, June and July, after a historic fall in April.

Projections

Despite the uncertainty regarding the recovery in demand and the high levels of crude oil inventory, the prices of the Brent and WTI references have remained above $40 per barrel since July. The market perceives a slow but sustained recovery of its physical fundamentals, an expectation that is reflected in the increase in the future prices of Brent and WTI.

In perspective, given the unprecedented situation of the collapse in demand and price in March-April –fundamentally due to the COVID-19 pandemic and the overproduction of oil– the prices have had since the entry into force of the OPEC+ cuts⁸ an extraordinary recovery of 20 and 24 dollars a barrel for Brent and WTI, respectively, 78% and 125%. The action of OPEC+ and the production cuts have once again justified the policy of intervening in the market and regulating production to defend the price of the natural resource.

OPEC’s MOMR pointed out, at the end of July, the increase in Brent and WTI quotations, by 2.45 dollars per barrel in relation to the average price in June, with the average price of Brent standing at 43.27 dollars per barrel and the average price of WTI at 40.77 dollars per barrel; with this increase, the differential between both references was reduced, standing at 2.52 dollars per barrel in July, a reduction of 60% in relation to 2019.

REDUCTION IN THE DIFFERENTIAL
BETWEEN BRENT AND WTI

OPEC notes in its August report that for the third consecutive month, oil futures prices rose, placing them in July 6% above the month’s average, driven by strengthening market fundamentals, as well as by the prospects for recovery in economic activity and demand for the second half of the year, as countries relax movement restrictions.

Projections⁹ by the U.S. Energy Information Administration (EIA) show an increase in its July expectations regarding the average price of Brent, placing it at $43 per barrel for the second half of 2020, and $50 per barrel for 2021, representing 7% more than the previous month’s estimates.

As for WTI, EIA expects it to remain stable during the second half of the year, averaging $39 per barrel in 2020 and projecting $46 per barrel by 2021.

RECOVERY OF THE BRENT AND WTI FUTURES
(AUGUST 2019 – AUGUST 2020)

The EIA reports an increase in future prices of references Brent (+5%) and WTI (+7%), which for August are located at 45.09 and 41.95 dollars per barrel, respectively, compared to prices recorded in July.

The dollar price indexes fell to 92.8 since August, the lowest level in two years, according to the EIA.

BRENT PRICES AND US DOLLAR VALUE

According to the EIA, the price of Brent crude oil, quoted in dollars, increased¹¹by 18% and 10% in the euro price, as a result of the depreciation of the dollar against this currency.

With regard to inflation expectations over the next five years, the EIA highlights that they have increased compared to March, when inflation expectations were almost 0%.

OIL PRICES AND INFLATION EXPECTATIONS IN THE US

According to the EIA, variations in oil prices are directly related to projections of future inflation rates; as shown in the graph above, inflation projections for the next 5 years increased from 1.17% in July to 1.52% in August.

PRODUCTION

OPEC Report

According to OPEC’s «Monthly Oil Market Report» published in August¹², world oil production in July stood at 83.67 million barrels per day, a drop of 11% in supply compared to average production in the first quarter of the year, which corresponds to the coming into effect of OPEC+ cuts as of May 1^st.

Oil supply from OPEC countries was 23.17 million barrels per day in July, representing 26% of world oil production.

At the end of the first half of 2020, oil supply from non-OPEC producers fell by 6 million barrels a day, of which 1.82 million barrels a day corresponded to the voluntary production cut by the 10 countries that signed the Declaration of Cooperation (DoC), while the remaining 4.6 million barrels a day of oil (60% of the total amount) was related to the drop in production by countries outside the DoC.

World production of oil and oil products, according to OPEC, was 88.8 million barrels per day in July, of which 23.2 million barrels are related to OPEC oil production and 5.09 million barrels per day corresponded to NGL and condensates.

GLOBAL OIL PRODUCTION
(4^th Quarter 2018 – 2^nd Quarter 2020)

Regarding the estimates for the third quarter, OPEC highlights that production will start to increase during the month of August, due to the easing of OPEC+ production cuts to 7.7 million barrels per day and the increase in production by the US and Canada, estimating that, by the third quarter of the year, world oil production will reach 86.16 million barrels per day.

EIA and IEA estimates

The Energy Information Administration (EIA) estimates¹³ that oil production in the third quarter of 2020 will be 90 million barrels per day.

WORLD LIQUID FUELS PRODUCTION AND CONSUMPTION
(2015-2021)

As for projections for 2021, on the one hand, the EIA forecasts¹⁴ that production will be approximately 99 million barrels per day. Although global oil demand is expected to increase gradually, the recovery in production will be limited by the significant reduction of investment in new exploration.

On the other hand, the International Energy Agency (IEA) forecasts that world oil supply will fall by 7 million barrels a day by 2020, for an average production of 88 million barrels a day –2% less than the EIA forecast– and an increase of 1.6 million barrels a day by 2021.

Worldwide drilling activity

The number of drilling rigs worldwide has fallen significantly, the firm Baker Hughes, in its report¹⁵International Rig Count, recorded for July 743 active drills, a figure that reflects the continued decline since the beginning of the year, when it located 1,078 drilling units, a fall of 31% compared to the records of December 2019.

 GLOBALLY ACTIVE DRILLS
(January 2019 – August 2020)

The regions affected the most by the reduction in active drills, according to data published on August 7 by Baker Hughes, are Latin America (-102), Africa (-84) and the Middle East (-81).

DRILL REDUCTION 2020
MOST AFFECTED COUNTRIES

OPEC countries

OPEC countries’ production, as reported in the July Monthly Oil Report, stood at 23.17 million barrels per day, an increase of 980,000 barrels per day of oil, with respect to June, due to the fact that once the extension of the production cuts of 9.7 million barrels per day for July was agreed upon in OPEC+, the monarchies of the Persian Gulf (Saudi Arabia, United Arab Emirates-UAE and Kuwait) ceased the additional cuts to the production quotas these countries had made in June. In other words, during July, the monarchies adjusted their production quotas to those agreed within OPEC+.

Saudi Arabia, Kuwait, and the UAE continue to exercise leadership within the organization in terms of production volumes, as they are, together with Iraq, the only nations within the organization whose production exceeds two million barrels of oil per day. On the other hand, the production¹⁷ in Congo, Gabon, Equatorial Guinea, Libya, and Venezuela, is under the 400 thousand barrels of oil per day.

Out of the organization’s 13 member countries, 4 of them (Saudi Arabia, United Arab Emirates, Iraq, and Kuwait) are making the greatest efforts to reduce oil supply, with a combined cut of 3.6 million barrels per day in July production compared¹⁸to April 18, 2020, in order to comply with OPEC+ agreements. Meanwhile, 6 other OPEC nations (Algeria, Angola, Congo, Gabon, Equatorial Guinea, and Nigeria) cut a combined 750,000 barrels per day of oil in the same period.

For their part, Libya, Iran, and Venezuela are not signatories to the OPEC+ agreements, so they were exempted from the production cuts.

However, Libya and Venezuela show in July 2020 a significant fall of -90% and -88%, respectively, in their oil production in relation to the average volume registered¹⁹ in 2014.

Regarding Iran, the other non-signatory to the agreement, this country fell in its production by more than 50% with respect to the average²⁰ in 2018, and in July of 2020, it was below 2 million barrels of oil per day, as a result of the sanctions²¹ applied by the United States to this country in 2018.

OPEC COUNTRIES’ PRODUCTION RANKING
(July 2020)

In the cases of Iraq, Nigeria, and Angola, these countries are expected to compensate²²for the 70% shortfalls in production agreed by OPEC+ in previous months, as announced in successive declarations by the relevant authorities.

PRODUCTION IN OPEP COUNTRIES
(MAY – JULY 2020)

With the entry into force of the agreement to relax OPEC+ production cuts, which now stand at 7.7 million barrels per day, production in OPEC countries will continue to rise in August, with the exception of those countries that must compensate for production and those countries that, although outside of the cut agreements, continue to face severe difficulties in maintaining their oil production levels, as is the case with Iran, Libya, and Venezuela.

Non-OPEC countries

According to OPEC’s monthly report²³, the production of non-OPEC countries by 2020 will average 62.11 million barrels per day; by 2021 it is expected to increase by 980,000 barrels per day, for an average of 63.10 million barrels per day.

The member countries of the Organization for Economic Cooperation and Development (OECD) increased their production in July by 204,000 barrels of oil per day compared to the previous month, led by Canada and the United States and driven by the recovery in prices.

OPEC and Energy Information Administration estimates²⁴indicate that average production in OECD countries by 2020 will be 28.67 and 30.39 million barrels per day, respectively.

Oil production in the OECD countries by 2021, according to OPEC forecasts, will be driven mainly by the OECD-America countries, with 24.55 million barrels a day, while in the OECD-Europe countries it will increase to approximately 4.11 million barrels a day, driven by Norway and the UK; furthermore, OECD-Asia will increase by 590,000 barrels a day, for a total of 29.24 million barrels a day, which is 1.8 million barrels a day less than the EIA’s projections, which predict a supply of 31.04 million barrels a day.

Russia

OPEC reported that, according to preliminary data, Russia’s oil production reached 8.80 million barrels per day in July, an increase of 50,000 barrels per day, or 0.5% over June levels. For its part, the Russian Ministry of Energy recorded²⁵ in July 9.7 million barrels a day of oil production, of which, according to OPEC’s MOMR, 800 thousand barrels a day are condensed, an amount that concurs with Russian government data.

The agreed production increase²⁶for Russia in August, with the implementation of the current OPEC+ cuts, is 500 thousand barrels per day compared to the May-July period this year.

However, according to official statements²⁷by Energy Minister Alexander Novak, the adjustment for August will be 400,000 barrels a day, reaching a production cut for the period August-December of 2 million barrels a day.

RUSSIA’S OIL PRODUCTION
(JANUARY – JULY 2020)

Norway

Norway’s production for July was 1.7 million barrels of oil days, after falling to 1.54 million barrels of oil days in June, below the 1.61 million barrels of oil days forecasted for the end of the second quarter, as published²⁸by the Norwegian Petroleum Directorate (NPD) and as per estimates in the monthly MOMR report for August. Based on Norwegian government sources, OPEC estimates a cut of 134,000 barrel days of oil for the second half of 2020.

Exports in July stood at 1.33 million barrels of oil per day, 20% higher than the previous month’s load. Norway’s oil production in June showed a year-on-year increase of 45.8%.

USA

Oil production in the U.S. continues to fall for the fourth month in a row. According to the EIA report²⁹of August 7, it stands at 10.7 million barrels per day, a decrease of 3.6% from the previous week and 17.3% from March 27.

The EIA lowers its forecast for U.S. production in 2020 to 370,000 barrels per day, for an average of 11.3 million barrels per day of oil, down 8.4% from 2019 levels and 13.1% from the record 13 million barrels per day in February and March 2020.

The EIA does not forecast an increase in US production by 2021, and estimates average production at approximately 11.1 million barrels per day.

UNITED STATES OIL PRODUCTION
(2018 – 2019 – AUGUST 2020)

For the first half of August, the U.S. is handling production levels that are similar to those recorded in May 2018, when its production reached 10.7 million barrels of oil per day, as a result of the increase in production of shale oil.

ACTUAL AND ESTIMATED U.S. PRODUCTION
(2019 – 2021)

According to OPEC estimates, U.S. oil production will increase to 11.79 million barrels per day by 2021, higher than the EIA forecast.

North Dakota

A special publication³⁰by EIA indicates that the drop in production in this country, between December 2019 and May 2020, is 21%; almost half of it (41.6%) corresponds to North Dakota (PADD 3).

U.S. OIL PRODUCTION BY AREA
(DECEMBER 2019 – MAY 2020)

This has been the area with the largest reduction in drilling activities in the U.S., going from 50 active platforms in December 2019 to only 12 active in May 2020. Between January and May 2020, the average drop in North Dakota was 1.5 million barrels per day, for a total of 615,000 barrels per day. Currently, the average number of wells in North Dakota is 12.8 thousand, a 25% reduction from the 2019 average.

ACTIVE DRILLS IN NORTH DAKOTA

The EIA estimates that, for the period August 2020 to July 2021, the activity of the wells in this area will recover and reach 1.2 million barrels per day, 83% of the average recorded in 2019.

Shale Oil

The OPEC reflects in its MOMR of August the estimations of the Norwegian consulting firm Rystad Energy, which indicate that shale oil has gained momentum in July, «the US fracking has recovered by 43% in July with 464 wells, compared to June with 324 wells. The most obvious increase was in the Permian Basin, where the number of wells increased by 114%.»

Rystad Energy reports³¹that fracking operations reached 324 wells in June, which are only 11 platforms less than the previous month.

The Norwegian consulting firm estimates that in the third quarter of the year operations may reach the April levels, when activity was recorded in 444 shale wells, although it is still far from the 978 operated in March and the 1,243 assets in February.

Drilling activity

According to Baker Hughes’ report³² North America Rig Count, the number of active oil drills in the US stood at 172, continuing the downward trend that has characterized this indicator during August.

ACTIVE DRILLING IN THE U.S.A.
(MAY-AUGUST 2020)

ECONOMY

COVID-19

As of August 17, the World Health Organization (WHO)³³reports that the number of COVID-19 infections exceeds 21 million registered cases worldwide, leaving a balance of 761,000 people dead. Data from Johns Hopkins University³⁴ show that 13.7 million people have recovered.

For the ninth consecutive week, the United States³⁵ and Brazil³⁶ lead the list of infected people with 5.4 million and 3.34 million, respectively. The death toll for both nations stands at 169,860 in the U.S. and 107,879 in Brazil.

The third country with the highest number of infections is India³⁷, with more than 2.6 million cases and 50,000 deaths. Russia, South Africa, Mexico, Peru, Chile, Colombia and Iran complete the list of the 10 countries with the most cases of coronavirus infections.

Russian President Vladimir Putin reported³⁸ on Tuesday, August 11, that his country had registered the first vaccine against COVID-19, and then on August 15, announced the production of the first batch of Russian coronavirus vaccine, to be marketed as Sputnik V (referring to the Soviet satellite of the same name, which was the first spacecraft to be put into orbit in 1957, during the Cold War). The announcement comes shortly after the director of the Gamaleya Center, Alexandr Ginzburg, announced that by next December or January 2021 the country will produce five million doses of the vaccine per month and that within a year the country will be able to cover all the needs of distributing this antiviral.

However, the announcement has been met with skepticism by Western researchers, who warn about what they consider to be risks in rushing to create a vaccine, while requiring more information from the Russian government. For its part, the WHO received the news with caution and has asked³⁹ Putin’s government to inform them about the process of developing Sputnik V, in order to, in the words of the executive director of the WHO’s Organic Group on Outbreaks and Health Emergencies: «…try to understand the product, know what trials it has followed and what the next steps would be.»

Economics in the OPEC MOMR

The OPEC’s MOMR forecasts⁴⁰a global economic recovery, with different timescales for different countries and regions: while the large economies of the industrialized nations, including China, performed relatively better from the quarantine de-escalation and reopening efforts, for the MOMR «the economies of most emerging and developing countries are on a downward trend»; global GDP for 2020 is estimated at -4.0% (down from -3.7% the previous month). However, GDP growth for 2021 remains constant in OPEC estimates, at 4.7%.

OPEC’s analysis estimates that, globally, the pandemic could be contained -implying manageable numbers of infections- by the end of this year, and consequently, business and consumer confidence, along with associated consumption expenditure, could gradually reach «pre-COVID-19 levels» by that date.

The August OPEC’s MOMR is based on IHS Markit‘s Purchasing Managers’ Index (PMI) to show the economy’s recovery, and indicates that July’s overall PMI in the manufacturing sector rose to 50.3, from 47.9 in June, while the PMI in the service sector also rose to 50.5 in July from 48 in June.

GLOBAL PMI (JULY 2019 – JULY 2020)

China

The forecasts for the Chinese economy remain encouraging. According to declarations⁴¹ by the Minister of the General Administration of Customs on August 12, the country’s overall merchandise exports will continue to grow, even if international trade on a global level continues to decline. Proof of this would be the growth in exports of 7.2% in July, the third increase of this indicator over the last four months.

OPEC’s July report reiterates that confidence, detailing that the 3.2% year-on-year GDP expansion during the second quarter of 2020 was driven by investment in infrastructure and real estate, the increase in the industrial and services sector; it places the weakest link in spending. On the other hand, the MOMR reflects that industrial production in China, a key factor in the recovery of oil demand, expanded by 4.8% in June compared to 2019.

INDUSTRIAL PRODUCTION IN CHINA (2019-2020)

Short-term estimates suggest a recovery of the Chinese economy, only threatened by the intensification of the trade war, sanctions and political tensions with the U.S. above all, as the Sino-U.S. relationship features as one of the subjects of the upcoming November presidential race in the United States.

India

The OPEC Report refers to the possibility that, in 2020, India will face the first contraction of its economy since 1979, revising downwards its GDP by -4.7%, compared to its previous estimates. For the short term, the MOMR is based on the IHS Markit PMI indicator, which fell to 46 in July for the agricultural sector, and rose to 34.2 in the same month for the service sector. OPEC estimates that the balance is leaning towards decline.

On the other hand, former Prime Minister Manmohan Singh, stated⁴²that the Indian government «…should take three steps to stop the crisis and restore economic normalcy in the coming years: ensuring livelihoods and spending capacity of the population through direct cash assistance; making capital available to businesses through government-driven credit programs; and repairing of the financial sector through institutional processes and autonomy.»

Russia

The statistics agency Rosstat reported⁴³ on August 11, that the country’s economy contracted by 8.5% year-on-year in the second quarter of the year, with GDP «falling in all areas except agriculture,» dropping at 79% in passenger transport and at 37.2% in the service sector. Rosstat’s prediction is in line with the forecasts of the country’s Central Bank and Vladimir Putin’s government.

According to the OPEC’s MOMR, the Russian economy has been impacted by the coronavirus crisis, with drops in industrial production (-9.4% year-on-year in June) and in the value of the ruble (-4.9% month-on-month in July, with a 20% loss against the U.S. dollar since the end of 2019). The report also refers to the recovery of raw material prices –especially the oil market, which has been supported by the OPEC Declaration of Cooperation– and its impact on the increase of Russian international reserves by US$ 22.9 billion in July, reaching US$ 590 billion. The report highlights as a stimulus measure taken by Russia the lowering of interest rates by the country’s Central Bank as a way to support recovery.

Europe

The OPEC’s MOMR reiterates previous analyses of the impact of the COVID-19 on the economies of the Eurozone nations, although the situation of States such as Spain, where infection rates have increased significantly, maintains the risk levels in the forecasts. Short-term expectations, according to the report, are linked to the COVID-19 crisis, and although they show a high possibility of recovery, part of these efforts involve trade relations with the United States. In this regard, it is reported⁴⁴ that the European Union (EU) is negotiating with the Trump government on tariff matters, which could lead to an intensification of the trade war between the Americans and the European bloc, since «…if the American sanctions are maintained and we do not reach an agreement, the EU must prepare to respond with sanctions«, according to the French Finance Minister⁴⁵.

Middle East

On August 13, it was announced the establishment of diplomatic relations between the United Arab Emirates and Israel, with the declaration signed in Washington by the Israeli Prime Minister, the Crown Prince of Abu Dhabi and the U.S. President, who takes credit for the so-called «total normalization of relations» between the two Middle Eastern countries, which has direct political implications at regional level.

Within this framework, Prime Minister Netanyahu reported that his unilateral plan to declare⁴⁶ Israeli sovereignty over West Bank territories –which implies the annexation of Palestinian territories–, is temporarily suspended. Palestine considers this agreement as an act of «betrayal» by the UAE and has responded⁴⁷by withdrawing its ambassador to the Emirates, while requesting an emergency meeting of the Arab League. Turkey and Iran criticize the agreement, while Oman and Bahrain welcome it. This political development makes the UAE the third Arab country –after Egypt (1979) and Jordan (1994)– to establish links with Israel. This agreement will have consequences for the region, since it moves away once more from the «two-state solution” on which international diplomatic action has been based, paving the way for the development of actions that could affect peace in the region, the economy and the international oil market.

United States

According to the Energy Information Administration’s (EIA) Short-Term Energy Outlook (STEO)⁴⁸, based on IHS Markit analysis, macroeconomic forecasts point to a 6.1% drop in the country’s GDP during the first half of 2020, (down from 8.2% calculated in July’s STEO), with a recovery in the third quarter and 2021. Similarly, the U.S. agency has recalculated its estimates regarding the country’s GDP growth for next year, placing the increase at 3.7% and not 5.1%, as it had predicted in its previous report.

Revenue data for July, according to the Congressional Budget Office⁴⁹, show a deficit of $61 billion, due to the government’s spending of $624 billion in July. However, the July data represents an improvement over the previous month⁵⁰, when the deficit was $865 billion due to the massive use of resources for the government’s first aid package. Estimates⁵¹ of the total budget deficit for 2020 stand at $2.81 trillion, more than double the existing record set during the Obama presidency⁵².

As for unemployment, the Department of Labor’s report⁵³released this week shows that the number of applications for aid fell from 1,191,000 on August 1^st to 963,000 on August 8, with a reduction of 228,000 applications; these figures place the number of unemployed people below one million for the first time since March 14, representing an unemployment rate of 11.1%.

U.S. UNEMPLOYMENT CLAIMS (MARCH-AUGUST 2020)

The U.S. economy continues to deteriorate at all rates despite the injection of economic and financial resources approved by both the White House and Congress, as well as by the Federal Reserve (Fed), earmarked⁵⁴ for an unprecedented $5 trillion stimulus package ($3 trillion in aid, including $500 billion in loans to large corporations, and $2 trillion in stocks between March and June) to alleviate the effects of COVID-19 on the country’s economy.

Such an amount of monetary resources is generating collateral phenomena in the economy, such as inflation and the devaluation of the dollar, which directly affect the oil market, since its transactions are mostly carried out using the U.S. currency.

IMPACT OF INFLATION AND DEVALUATION OF THE U.S. DOLLAR ON THE VALUE OF THE OPEC BASKET
(Base June 2001=100)

In July, the dollar lost its value against most of the major currencies of the industrialized economies and large oil importers: U.S. dollar lost 2% of its value to the Euro, 1.1% against the Chinese Yuan, and 1.0% against the Indian Rupee.

Thus, in nominal terms the OPEC basket reached $43.42 per barrel in July, but in real terms, taking into account the effect of inflation and dollar devaluation, its value was $27.81 per barrel.

Inflation in the U.S. remains high, with a 0.6% increase⁵⁵ in July (up from 0.1% in May, the lowest level in four and a half years), due to demand stimulated by states’ reopening.

U.S. INFLATION DURING THE PANDEMIC

According to the EIA’s STEO, the inflation forecast points upwards. Likewise, the behavior of markets such as gold –whose prices have been rising steadily since March– or Treasury Inflation-Protected Securities/TIPS (which have become attractive to investors), may suggest that investors are turning to safe and stable values because there is an expectation of moderate inflation (although without leaving the control of the Fed) or because it is thought that the economy may enter stagflation.

The STEO states that one partial result of the flexibility measures taken so far by the U.S. government and the Fed in monetary policy is the increase in market expectations about inflation, which we have referred to in our Oil Report. However, inflation has not reached the 2% target set by the Fed, which is necessary to raise interest rates to figures higher than the 0% currently held by the Federal Reserve.

With this forced support of the U.S. economy comes the conjunction of rising inflation (regardless of whether the Fed’s targets are met or not) and consistently high unemployment. As a result, the Misery Index⁵⁶ is rising. By 1975, the Misery Index, which is the sum of inflation and unemployment, reached 19.9% and peaked at 22% in 1980.

EVOLUTION OF THE U.S. MISERY INDEX (1970-2019)

After the impact caused by COVID-19, this index of economic and social costs in the U.S. stands at 11.20%. Even if the economy and the financial markets experience situations of recovery –whether temporary or definitive, once the pandemic is brought under control– the levels of unemployment and the rate of inflation will remain high in the short term, so that a large part of the U.S. population will have to face, in 2020, a Misery Index that may be the highest in almost nine years.

U.S. MISERY INDEX (2010-2020)

DEMAND

OPEC estimates

OPEC updated its estimates regarding the demand for crude oil at the global level, predicting an increase of almost 9 million barrels of oil per day for the third quarter of the year, in the midst of new consumption behavior, which depends on the variable that represents the COVID-19 pandemic and the validity or expiration of the fiscal stimuli, monetary policies and labor subsidies that each country or region may present.

According to OPEC, demand will tend to recover the remainder of 2020 and in 2021. The Organization warns that uncertainty in job stability may become a factor preventing the achievement of the demand levels registered in 2019.

In its monthly report⁵⁷, issued on August 12, OPEC indicates that for the third quarter of 2020 the demand for oil will be 92.1 million barrels per day, an increase of 10.26 million barrels per day with respect to the second quarter of the year, with a recovery trend for the second half of the year, when OPEC estimates that the COVID-19 virus will be controlled, which would avoid the interruptions of the economies in the world.

The year-on-year numbers of world oil demand fell every month this year 2020 until they reached 18 million barrels a day below 2019 demand; in such scenario, OPEC expects global production to stabilize at 90.62 million barrels a day in 2020, a year-on-year decline of 9 million barrels of oil a day.

Regarding the demand forecast for 2021, the report revealed no change, so OPEC continues to estimate an increase of 7 million barrels per day over the 2020 projection, to reach 97.6 million barrels per day. The report points out that there may be a trade-off between lower demand in non-OECD countries and better-than-expected demand in the OECD nations of Europe.

WORLD OIL DEMAND PROJECTION (2020 – 2021)

According to OPEC, the OECD countries account for about 47% of world oil demand, a ratio that has remained unchanged in 2019 and in 2020, despite the contraction in the economies of the group’s member countries since March this year. The OECD, like OPEC, believes that if COVID-19 infections can be controlled at current levels, their economies will not be disrupted and consumption may exceed current predictions.

However, OPEC also takes into account variables that may limit demand growth, such as persistent fuel gains, the continuation of oil displacement programs and the elimination of labor market subsidies.

The OPEC assures in its report that the fuel used to mobilize the aeronautical industry will have difficulty in recovering the losses of 2020 in terms of demand, due to the lack of confidence in air mobilization, in addition to the implementation of dynamics associated with teleworking and teleconferencing, which minimize the need for transfers whether for work, business or study.

For their part, economists from the International Air Transport Association (IATA), the group that brings together most of the world’s airlines, said⁵⁸ that the high rate of contagion in the U.S. puts at risk the recovery of travel, whose fall in 2020 is estimated at 36%, and could worsen and fall to 53%, if air mobility restrictions are maintained in the U.S. and other emerging economies.

The European Union confirmed on Wednesday, August 12, that it is maintaining its ban on the entry of people from the United States and other countries with high levels of coronavirus infection –by not including them on the list of 15 countries authorized to make non-essential trips to EU territory. This will cause a loss of at least 29 billion dollars a year, as a result of the interruption of these travel operations.

MOST INFLUENTIAL AIRLINES WITH FLIGHTS
FROM THE U.S. TO EUROPE

EIA and IEA estimates

The results and estimates of demand behavior provided by the EIA, in its August STEO report⁵⁹, reflect a drop of 8 million barrels per day for 2020 oil demand, and a recovery in 2021 to 2019 levels.

The EIA reported that world oil demand in July was 93.4 million barrels of oil per day (a year-on-year drop of 8.7%), with an average estimate of 93.1 million barrels of oil per day in 2020, while forecasting demand of 100.1 million barrels of oil per day by 2021, a million barrels of oil per day less than in 2019. This is a projection into the future for the encouragement of private oil companies.

The International Energy Agency (IEA), in its August⁶⁰ report, reduced its estimates of oil demand for the remainder of 2020 and for next year, due to stagnation in mobility as a result of the high number of cases of COVID-19 worldwide, and the implications of this situation for the weakening of air transport for passengers and cargo, both because of the application of restrictions on mobility and because of the economic crisis affecting trade.

In its monthly report, the multilateral agency adjusted downwards all forecasts regarding the demand for oil in the coming year, especially for the second quarter of 2021. Although July is usually a peak month in terms of air transport mobility in relation to the start of the northern summer, air traffic was two thirds below last year’s average for the same period.

The IEA puts global demand for oil in 2020 at 95.25 million barrels per day, so it estimates a reduction of 500,000 barrels per day in demand for the last two quarters of this year. At the same time, it expects that the production that had been withdrawn from the market by the USA and Canada –due to the oil price crisis and the low profitability of operations under such conditions– will be reactivated in the next two quarters of the year, which would generate an increase of more than 500 thousand barrels per day of oil in the supply of non-OPEC countries in the second half of 2020.

As for the estimations for next year, the IEA estimates that demand will be at 97.1 million barrels per day, identifying low demand for air traffic fuel as the main weakness for its recovery.

ESTIMATED REDUCTION IN DEMAND FOR OIL
(THIRD AND FOURTH QUARTER 2020)

High uncertainty persists regarding global oil demand

Regarding the uncertainties and risks surrounding global oil demand, OPEC crossed its oil product demand projection data for 2021 with that of six other sources in the oil sector, in order to place the level between the highest and lowest estimates within the range of uncertainty in demand by region, which yielded an average of 2.9 million barrels of oil per day. This figure, which represents 46% of the increase in world oil demand projected by OPEC for 2021, supports the caution with which the behavior and recovery of oil demand in 2021 is being developed.

The average increase in demand of 2.9 million barrels of oil per day by 2021 is impacted by uncertainty regarding economic recovery in those countries and regions where the demand for oil will grow for the next year, such as the U.S., China and the European countries.

Doubts about recovery are evident, beyond the projections that can be made for 2021, in the various restrictions on health prevention, which have affected mobility since March.

OPEC and the different data sources of the oil sector divulge information that allows the producing countries to be alert and ready for an economic rebound in 2021, which would affect the behavior in the consumption of the large economies that represent 62% of the world demand for oil (USA, European countries, China, rest of Asia and India).

These expectations and projections are crossed through transversally by the behavior of the COVID-19 variable, and will be maintained until a global health solution allowing people to live with the virus without any risk is achieved.

FORECAST OF OIL DEMAND AVERAGE GROWTH
(BY REGION; YEAR 2021)

Despite the disparity of criteria regarding the uncertainties in demand and the elements that determine it, the OPEC report has points in common with the analysis and predictions made for the coming year by different organizations that report energy data.

These variables, which are shared by the studies of multilateral institutions and organizations, including OPEC, are: solid GDP growth in all sectors; more appropriate management of COVID-19; no significant stagnation of economic activity; a very low statistical base (generated by the unprecedented drop in demand in 2020) that will make it possible to estimate significant demand growth in 2021, and pressures and efforts to recover lost demand in the aviation fuel and gasoline sector, within the context of new dynamics that include reduced travel and teleworking.

High unemployment rates, the recovery of household income and the reactivation of the industrial and manufacturing sector will also be variables that will influence the behavior of demand for the second half of 2020 and 2021.

GDP GROWTH AND RISING GLOBAL OIL DEMAND

China

The OPEC report refers to developments in Chinese oil demand for the first quarters of the year, including the recovery in demand for crude oil and other economic indicators in June, with expectations for the short term based on the steady speed of economic recovery and local fuel consumption, at a rate that will be faster than that of its neighbors and of the large global economies.

Throughout the crisis of the collapse of the oil market, China has been acquiring cheap oil to store in its strategic and commercial reserves, which is why the country reached records of oil imports during the first and second quarter of the year. However, operators expect this situation to change as of August, since there have been restrictions and «bottlenecks» in the handling of the unloading, storage, and transportation of large volumes of imported crude oil.

As we have pointed out in previous Oil Reports, different sources mentioned⁶¹ that at least 80 tankers have been off the coast of China waiting to unload for more than a month, due to the high levels of storage and the lack of space to store the crude oil. This situation highlights one of the challenges this nation faces in terms of stimulating demand and reducing storage overload.

India

The MOMR notes that despite the growing number of COVID-19 infections in India, demand showed signs of recovery in June, when compared to May. The same impression is expressed by IHS Markit on August 5, when the consulting firm stated that even though consumption and demand were affected in the first quarters of 2020, in July the Indian oil imports totaled 5.14 MBD, an 82% increase compared to June, and 23% year-on-year; also, the average oil imports for June and July were marginally lower than 4 MBD, which is close to normal activity levels. The country’s Petroleum Minister estimates that fuel demand in India will rebound to pre-crisis levels by the end of September.

Europe

Data from the OPEC’s MOMR for European nations with OECD membership refer to the sharp drop in demand in May 2020, with emphasis on reduced oil demand by the four largest consumers: UK, France, Italy, and Germany, due to lower requirements for diesel, jet fuel, and gasoline as a result of containment measures in the region.

According to the report, no further containment and shutdown measures are expected to affect the European economy in the second half of the year. Furthermore, the EU aid package and the current stimulus measures are seen as making a positive contribution to recovery in the rest of 2020 and during 2021.

For its part, the recent IEA report mentions that July’s mobility data shows fuel demand below seasonal figures in Europe, although it suggests an upward trend in the region’s recovery.

USA

Oil imports into the U.S. fell⁶² to 5.6 million barrels a day on August 7, resuming the downward trend it showed in July⁶³. Despite the fact that U.S. refineries continue to increase their activities, reaching 80% of their capacity this week, high storage levels will continue to limit oil imports.

Currently, the average of oil imports over the last four weeks is 5.6 million barrels per day, a reduction of 25% compared to the same period in 2019.

The EIA’s STEO forecasts that oil and other liquid fuel consumption will average 18.5 million barrels per day in 2020 and 20 million barrels per day next year, adjusting these forecasts upwards by 120,000 barrels per day for its 2020 projection and 90,000 barrels per day for its 2021 projection.

On the other hand, the report of this U.S. agency increases its forecasts for the consumption of gasoline, hydrocarbon gas liquids, and distilled products; such rise is motivated by the projected increases in both the GDP for 2020 and the employment levels for 2020 and 2021, as well as by the growth of the petrochemical industry and the consumption of ethane in the country in 2020 and 2021.

STORAGE

The current increase in oil inventories in OECD countries continues, and this trend is reflected in recent OPEC and EIA reports. In the case of the monthly EIA report, it is indicated⁶⁴an increase in OECD countries’ inventories of 3.9 million barrels per day, for a total of 118 million barrels of inventory in June. At the end of the first quarter, inventories reached 13 million barrels per day.

However, storage levels will be progressively reduced; according to EIA data, they will exceed 80 days of coverage in 2020, to fall to approximately 65 days of coverage in 2021.

OECD INVENTORY PROJECTION

On the other hand, OPEC estimates that, according to preliminary data, OECD inventories increased⁶⁵ for the fourth consecutive month, with 24.3 million barrels more in June. Average inventories increased by 12.8 million barrels over the last fortnightly average, to a total of 1.607 million barrels per day.

OECD COMMERCIAL INVENTORIES

As for the days of coverage of the inventories in the OECD countries, there is an increase of 6% in relation to May, for a total of 73.40 days of coverage, which represents a surplus of 20% in relation to the levels of storage for the same period in 2019.

The construction of the inventories is above the average of the last five years, although it presents variations according to the region of the OECD countries and the time in which the data is determined. In this regard, OPEC highlights that the most significant increase in June was that of the U.S., while Europe and Asia showed a decrease of 0.5 and 4.9 million barrels per day, respectively. In July, U.S. commercial inventories showed a reduction of nine million barrels, according to preliminary data in the OPEC report.

Since June demand has been outstripping supply, as OPEC and its partners push for production cuts in the face of price recovery, so oil inventories should be reduced by four million barrels per day for the last four months of the year, according to a Bloomberg news agency analysis.

USA

U.S. commercial crude oil inventories fall for the third consecutive week; the EIA reported⁶⁶ as of August 12 that storage fell 1% from what was reported on July 6.

Excluding strategic reserves, the volume of inventories stands at 514.1 million barrels. The reduction was mainly seen on the East Coast (PADD 1) and the Gulf Coast (PADD 3), which fell by 9% and 2%, respectively.

OIL STORAGE UNITED STATES 2019-2020

The EIA estimates that inventories will begin to fall by the end of the second half of 2020, for an annual average of 483 million barrels per day, and projects a reduction by 2021 and an average of 469 million barrels per day.

In this context, Cushing, Oklahoma, has been where the largest increase in commercial oil inventories was reported, with 142.4 million barrels per day, a 2% increase over the August 6 week. This region includes the strategic oil reserves, although the increase is basically of the commercial reserves. On the other hand, the strategic reserves register a slight decrease the week of 0.34% regarding the previous week, to 653.8 million barrels.

U.S. coverage days fell again⁶⁷ this week to 35.4 days, a drop of 1.4% from the previous week. Inventories are currently 10 days above 2019 levels.

DAYS OF OIL COVERAGE IN THE U.S. 2018-2020

The crude oil inventory in the U.S., including strategic reserves, reaches a storage volume of 1,167 million barrels per day.

VENEZUELA

Some considerations on the handling of production figures

In order to correctly analyze OPEC’s estimates of oil production in Venezuela, it is essential to understand the origin of the data that is used for this purpose.

In 1998, at Venezuela’s request, OPEC chose six secondary sources to serve as a basis for discussion and decision-making in the quota system; also OPEC decided not to take into account the official figures of the respective governments. Therefore, member countries’ compliance with the cuts or increases decided upon at OPEC would be based on the data provided by these secondary sources, including the International Energy Agency.

Those were moments of attacks on the heart of OPEC, a weakened and divided organization; it was when Venezuela raised the argument that «the OPEC is a club of Pinocchios» (a quip made by a then-Oil Minister); it was the peak in the country of the so-called “Apertura Petrolera” (“Oil Opening”, the de facto liberalization and privatization of the oil sector in the 90’s).

During the period of the “Apertura” in Venezuela, the argument was made that the production from the “mejoradores” (improvers or upgraders) of crude oil in the Orinoco Oil Belt could not be reflected as part of oil production, with the pretext that it was «synthetic oil». A similar argument was made regarding Orimulsion production, which was claimed not to be oil, but «bitumen». Both arguments were central to the volumetric policy being developed in the country within the framework of the Oil Opening, which resulted in the violation of OPEC quota agreements and the subsequent weakening of oil prices.

It is from this period that OPEC reflects the production figures as coming from both «direct sources«, issued by the countries’ official authorities, and   «secondary sources«, issued by the international agencies.

In Venezuela, between 2002 and 2004, once the Oil Opening was put aside and the policy of “Plena Soberanía Petrolera” (“Full Oil Sovereignty”) was initiated⁶⁸, the close collaboration within OPEC was reestablished, as well as the commitment to defend the price of oil. In this context, the information on oil production –sent to OPEC by direct communication– was done through the Ministry of Petroleum, was supervised by State institutions, and was also certified by international firms with a very high reputation for financial audits, so there was no need to resort to «secondary sources«.

However, since the international agencies, especially the IEA, are committed to volumetric policies to the detriment of price defense, the «secondary sources» insisted on making invisible the Venezuelan oil production figures, those corresponding to Orimulsion and the improved crude oil from the Orinoco Oil Belt. For that reason, the figures they issued differed by 600 thousand barrels a day, below those issued directly by the Ministry of Oil to OPEC. In other words, the agencies considered as «secondary sources» persisted on not recognizing either Orimulsion or the improved crude of the Belt as oil.

For that same period, given the disparity between the different sources of production reporting to OPEC, the institutions responsible in Venezuela for the administration and control of public finances imposed strict control and monitoring of oil production and exports, which must coincide with the royalties that were reported and verified by the Ministry of Finance and the Central Bank of Venezuela on a weekly basis –there was no way to hide the figures– since the oil industry was the main source of foreign currency, representing 96% of the nation’s income.

Another additional fact to emphasize is that the figures handled by OPEC do not include the production of condensates, which is extra light oil that does not fall under the OPEC quotas, although the procedure for condensates’ extraction is the same as for any other variety of crude; therefore, to the direct information issued by the Ministry of Oil for the period 2002-2014, it would have to be added between 176 and 150 thousand additional barrels of oil, corresponding to condensates.

At that time, for political reasons, news agencies and national and international media would take as a reference the data coming from «secondary sources«, which were always below the direct communication figures; they did so as a way of ignoring the price defense policy and favoring the volumetric policy of the so-called “Oil Opening”.

However, as of 2015, the new authorities heading both the Venezuelan Ministry of Petroleum and PDVSA stopped issuing public information regarding the sector’s performance; the government did not publish any more figures regarding national accounts, and the mechanisms of supervision and control, such as the office of the Ministry of Petroleum in Vienna, were dismantled. In consequence, there is no truthful information regarding the country’s oil production now, and it is even less possible to verify the liquidated royalties or the income in foreign currency into the National Treasury.

On the other hand, nowadays the production of improved crude oil is non-existent in the country, due to the operational collapse of the oil improvers located in the Jose Complex (in Anzoátegui State, northeast of the country), so the production of the Orinoco Oil Belt –which was the object of the difference disputed with the «secondary sources«– does not make a great difference, since it is not produced. The little oil currently produced in the Orinoco Oil Belt, whose production fell from 1.3 million barrels a day in 2013 to 180,000 barrels a day at present time, is marketed as a blend and as DECOM (crude oil with naphtha), so now the «secondary sources» became the closest thing to reality, and are also the only source of information in the absence of verification mechanisms of the country’s official information source. That is why, for the analyses and evaluations made regarding Venezuela’s oil production in this Oil Report, we use the «secondary sources» as data.

Venezuela according to the MOMR

According to the latest report of the Organization of the Petroleum Exporting Countries, published⁶⁹ last August 12, Venezuelan oil production continues to stagnate, as a result of the loss of operational capacity of the state oil company and the government’s mismanagement of the sector. The cuts agreed by OPEC+ last April had no impact on the drop in the country’s production, since Venezuela is not a signatory to OPEC+ agreements.

The OPEC report puts Venezuela’s production for July at 339,000 barrels of oil per day, based on information obtained from secondary sources. This figure shows a decrease of 20 thousand barrels in relation to what was published in the MOMR in July⁷⁰, and is 285 thousand barrels less if compared to the beginning of the crisis in April, when national production, already reduced, reached 624 thousand barrels of oil per day.

OPEP COUNTRIES PRODUCTION
(2018-JULY 2020)

At current production levels, Venezuela has lost 2.67 million barrels of oil production capacity since 2014, the 88% of production, from the 3.015 million barrels per day of production in December 2013. The country has fallen back 80 years to production levels in 1930.

HISTORICAL VENEZUELAN OIL PRODUCTION
(1922-2020)

Within OPEC, of which Venezuela is a Founding Member, the country’s role is now practically irrelevant, not only because the last ministers who have represented the nation have neither the knowledge nor the political weight they used to have within the organization, but also because in terms of production, Venezuela has fallen from 4^th place as a producer in 2008 to 9^th place at present time, only above Congo, Gabon and Equatorial Guinea, countries of recent membership.

PRODUCTION OF OPEC COUNTRIES (JULY 2020)

It is worth noting that in the August report, OPEC adjusts downward the production reported in June for Venezuela, which was recorded at 356,000 barrels per day. However, this month shows a downward adjustment of -6%, for a production in June of 336,000 barrels per day; that is, 20,000 fewer barrels per day–a figure that directly reflects the drainage of inventories currently being produced.

VENEZUELA’S OIL OUTPUT (JANUARY – JULY 2020)

The decrease in production in Venezuela from April –when the oil price crisis occurred– to date represents a drop of 54.5%, which is more than half of its production in 2020, continuing the trend of operational collapse that began in 2015.

Oil Spill Continues to Expand Off Venezuelan Coast

In our Oil Report last week, we denounced the oil spill off the coast of Falcón State, which was caused by some failure or breakdown in crude oil or hydrocarbon storage and drainage systems at El Palito Refinery, located in Puerto Cabello (Carabobo State).

No PDVSA authority has declared to the public about the origin of this serious environmental incident, nor has anyone acted in accordance with the protocol established for this type of incident, which calls for detecting and repairing the failure while also deploying all resources and equipment for spill containment and environmental remediation activities. None of the authorities responsible for the incident have addressed the country with explanations, in violation of the Environmental Criminal Law.

However, groups of scientists and communities surrounding the place where the oil spill happened have deployed their scarce resources in an effort to contain the spread of the spill, which now affects the Morrocoy National Park, home to an important variety of marine flora and fauna.

The geographic area of the national park affected by the spill also includes the Cuare Wildlife Refuge, which was declared a protected area in 1972 and has been under the Convention on Wetlands of International Importance (RAMSDAR) since 1988; this zone hosts at least 300 species of birds, besides endangered reptiles and mammals.

The importance of the area lies in its species diversity: the areas affected by the spill are mating ecosystems for many marine species valued for human consumption, and which support both commercial and artisanal fishing on a family scale. In the cayos (keys) can be found mangrove ecosystems that sustain the richness of species are particularly vulnerable to oil spills.

This week, the situation has become more critical, according to the assessment of marine biologist and ecologist Eduardo Klein⁷¹, a researcher at the Remote Sensing Laboratory of Simón Bolívar University, who has compared the spread of the July 22 spill with satellite images⁷²; the size of the spill’s oil slick suggests that there was about 25,000 barrels of oil in the waters off the Morón coast.

In the following radar image, biologist Klein shows the oil slick, which can be seen in front of El Palito Refinery and which extends 27 kilometers from the coast.

Through his Twitter account, Klein has documented the spread and course of the spill, which he calls «the tongue of death»; by July 26 this “tongue of death” occupied 260 square kilometers. Today the crude remains uncontrolled: kilometers of Gulf beach in Falcón State are stained with oil that has now reached Morrocoy National Park, an inlet of islets with reefs and mangroves–some 320 square kilometers now totally contaminated.

A week after the sea began to bring the oil remains to the coast, and the effects of the spill began to be seen, a teleconference was held between researchers, environmentalists and volunteers to take action. State oil company PDVSA, for its part, has yet to offer any statement in relation to this event.

A Country Out of Gas

We close our Oil Report by reporting that gasoline shortages are worsening throughout the country, as supplies of fuel imported⁷³from Iran –whose arrival in Venezuela on May 25 was widely trumpeted in propaganda– have been depleted.

The current government and the PDVSA’s Intervention Board, as well as the authorities of the Ministry of Petroleum, have been unable to put the country’s refineries into operation. The refineries’ present operating capacity is just 10% of their processing capacity of 1.3 million barrels per day.

Despite countless announcements about an imminent revival of the refineries, they are still not producing the fuels the country needs. On the contrary, the oil workers, who are involved in a national mobilization plan to claim their economic and labor rights (rights that have been denied and  ignored by the PDVSA authorities), reported countless accidents, including gas and hydrocarbon leaks, as a result of the authorities’ consecutive failed attempts to reactivate the Venezuelan refineries. This proves once again that PDVSA is in complete operational collapse and lacks direction.

On the other hand, U.S. authorities continue to act against agents or traders who try to introduce fuels into the country, which aggravates the national situation for the Venezuelan population, who is already subject to a severe state of confinement, a measure that the government has imposed since the beginning of March of this year in view of its impossibility of guaranteeing basic services to the population such as gas, electricity, and gasoline.
This week, we learned of a decision by Chinese energy giant PetroChina to liquidate a joint transport company with PDVSA that operated four large-capacity vessels⁷⁴ acquired in 2012 as part of the company’s Operational Sovereignty Plan. In that moment, the Plan allowed PDVSA⁷⁵to have a fleet of 81 tankers transporting oil and products, 54 of which were under the control of the State, which gave Venezuela the autonomy and capacity to manage more than 50% of our exports by 2013.

The joint venture that operated the VLCCs “Boyacá”, “Carabobo”, “Junín” and “Ayacucho” was dissolved by decision of the partners. Information from the news agencies indicates that the Chinese company kept the “Boyacá”, “Carabobo” and “Junín” vessels, and PDVSA kept the “Ayacucho” vessel, which was later transferred to a Russian operator and renamed «Máximo Gorky«. All these operations concerning valuable assets of the Venezuelan state continue to hand over, cede or sell such assets to private entities without following the country’s legal regulations or the procedures established by the national oil company.

PDVSA is still on the road to dismemberment, and the government continues to hand over strategic assets that belong to all Venezuelans –and which, paradoxically, constitute the only opportunity to solve the serious crisis the oil industry faces and the citizens suffer.

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