Rise of the LatAm petrostates

The ongoing Iran war in the Persian Gulf has led to a drop in crude tankers exiting the region, with Gulf exporters ramping up alternative routes, China cutting imports, and the US and Europe drawing on strategic reserves. However, a surprising boost in production has come from several Western Hemisphere countries outside the top petrostates.

Brazil, Guyana, Venezuela, and Argentina all reported production gains in the first half of this year that surpassed analysts' prewar forecasts. This surge in non-OPEC production growth, about 2.5 million barrels per day, is the highest in at least a decade, according to JP Morgan's Natasha Kaneva.

While the US remains the top oil producer, countries like Guyana and Venezuela are gaining strategic importance in a post-Hormuz world. Guyana, with US support, is set to see a surge in offshore drilling due to ExxonMobil's new rig. Guyana's crude has also filled the gap left by Russian barrels for European refineries. However, the country faces challenges in building grid and port infrastructure and managing oil revenues effectively.

Venezuela, despite attracting numerous drillers since former leader Nicolás Maduro's arrest, has struggled with tangible deals due to earthquakes, an overburdened local oil bureaucracy, and US policy conflicts. China, on the other hand, is benefiting from Latin America's oil boom, purchasing nearly half of Brazil's exports and about 8% of Guyana's.

The emerging cohort of LatAm petrostates presents a counterweight to OPEC, with their barrels not having to navigate dangerous straits. As the Arctic becomes a potential transit route for Chinese vessels, the significance of these non-OPEC producers in the global oil market cannot be ignored.