Latin America and the Caribbean saw a significant 27% year-on-year surge in oil production in February 2026, reaching 377MMb, according to a recent report by OLADE. This growth was primarily driven by structural production shifts in Brazil, Mexico, and Argentina, accelerating alongside global supply disruptions from the Strait of Hormuz closure. While Argentina’s unconventional Vaca Muerta shale play and Brazil’s deepwater pre-salt fields represent robust, long-term structural expansions, Mexico’s contribution relies on short-term production stabilization amid a broader long-term decline and capital expenditure cuts at PEMEX.
Latin America and the Caribbean extracted 377MMb of oil in February 2026, a 27% year-on-year increase compared to 298MMb in the same month of the prior year, according to the most recent Oil and Natural Gas report published by the Organización Latinoamericana y Caribeña de Energía (OLADE). Mexico, Brazil, and Argentina are identified as the primary drivers of this expansion, reflecting structural shifts in regional production that have accelerated simultaneously with the global supply disruption triggered by the Strait of Hormuz closure in late February.
On a monthly basis, the region also registered 4.4% growth compared to January 2026, driven by recoveries in Brazil and Venezuela following declines in the prior month.
The Regional Architecture: Three Countries Dominate
Brazil, Mexico, and Venezuela represent 68% of all regional oil production, underscoring the crucial role these three countries play in the dynamism of this sector in the region. The concentration is not new, but the composition of growth within that trio has shifted materially. Venezuela, historically the dominant regional producer, has been reduced to a secondary role following years of production collapse and the additional disruption caused by US military action against the Maduro government in January 2026. Brazil and Mexico are now the load-bearing pillars of regional hydrocarbon supply.
The operational activity in Vaca Muerta, Argentina, record extraction levels in Brazil’s pre-salt layer, and increased production in Mexico are pushing regional supply to figures not seen over the past 12 months. Each of these production stories is driven by a fundamentally different model: Argentina’s expansion is the result of a private sector-led, unconventional shale play that the Milei government has actively promoted through deregulation; Brazil’s is a Petrobras-led deepwater program decades in development; and Mexico’s reflects the incremental stabilization Moody’s has characterized as execution improvements rather than a structural reversal of PEMEX’s underlying depletion trends.
Argentina and Vaca Muerta: The Shale Outlier
Vaca Muerta, the Neuquén Basin formation that spans approximately 30,000km2 of Patagonian territory, has become one of the most commercially significant unconventional plays outside the United States. Argentina’s gas production growth is particularly notable. Natural gas production reached 26 billion cubic meters, representing a 30% year-on-year increase, with the development of shale gas in Vaca Muerta alongside unprecedented production in Brazil’s pre-salt reformulating the regional supply matrix precisely as gas establishes itself as a source to support electricity systems with high renewable incorporation.
Argentina and Trinidad and Tobago each dominate the regional gas market with a 21% share each, followed by Brazil with 13%, Peru with 12%, while Venezuela, Bolivia, and Mexico each account for approximately 9%. Mexico’s 9% share of regional gas production is directly consistent with its domestic production situation: the country extracts approximately 2.3 billion cubic feet per day against a demand of approximately 9 billion cubic feet per day, leaving it 75%-plus import-dependent on US natural gas.
Brazil’s Pre-Salt Machine
Brazil’s position in the regional surge is structural rather than cyclical. Petrobras’s pre-salt fields off the Santos and Campos Basins operate at water depths of 1,500 to 3,000 meters and have transformed the country into a top-10 global oil producer. The February production record in the pre-salt layer is a continuation of an investment trajectory, not a response to the Iran conflict’s price signals. Brazil’s long-term deepwater capital program, which Petrobras has sustained through multiple commodity cycles, is generating the production volumes that shorter-horizon investors in other markets have not been able to match.
The contrast with Mexico is stark and directly relevant. PEMEX and Petrobras signed a two-year MoU on June 23, explicitly targeting cooperation on deepwater exploration and production in the Gulf of Mexico, with Brazil’s pre-salt expertise identified as the primary technical contribution PEMEX lacks. OLADE’s February data provides the quantitative backdrop for that deal: Brazil is producing at record levels from deepwater plays while Mexico has not yet produced a single barrel from its own deepwater acreage.
The Mexico Paradox: Regional Leader, Structural Decliner
Mexico’s contribution to the regional February surge is the most paradoxical of the three. The country’s liquid hydrocarbon production reached approximately 1.65MMb/d in early 2026, a stabilization from the steeper declines of prior years. That stabilization was sufficient to contribute to the regional aggregate gain. But the stabilization has been achieved at roughly half of Mexico’s 3.4MMb/d peak in 2004, with Moody’s warning that the major producing fields, Maloob, Zaap, Quesqui, Tupilco Profundo, are declining at double-digit annual rates.
The regional surge documented by OLADE is therefore a story Mexico is participating in at the margins of its actual capacity. Argentina’s Vaca Muerta is growing because private capital, deregulation, and pipeline infrastructure investment are aligned. Brazil’s pre-salt is growing because Petrobras committed capital to deepwater decades ago and is now harvesting that investment. Mexico’s contribution to regional growth is stabilization rather than expansion, and it is occurring against a backdrop of reduced drilling rig counts, a 51% real-terms capital expenditure decline in early 2026, and an expert debate about whether oil bidding rounds need to be reactivated to attract the exploration capital that neither the mixed contract model nor the PEMEX-Petrobras MoU can generate in the near term.
Source: Original Article
