<PAGE>   1
================================================================================

                                  United States

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                    FORM 10-Q


[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
           For the transition period from ____________ to ____________

                         COMMISSION FILE NUMBER 1-14380

                           CITGO PETROLEUM CORPORATION
                           ---------------------------
             (Exact name of registrant as specified in its charter)


                DELAWARE                             73-1173881
                --------                             ----------
    (State or other jurisdiction of      (I.R.S. Employer Identification No.)
     incorporation or organization)

         ONE WARREN PLACE, 6100 SOUTH YALE AVENUE, TULSA, OKLAHOMA 74136
         ---------------------------------------------------------------
         (Address of principal executive office)              (Zip Code)

                                 (918) 495-4000
                                 --------------
              (Registrant's telephone number, including area code)


                                      N. A.
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)


                  Indicate by check mark whether the registrant (1) has filed
         all reports required to be filed by Section 13 or 15(d) of the
         Securities Exchange Act of 1934 during the preceding 12 months (or for
         such shorter period that the registrant was required to file such
         reports), and (2) has been subject to such filing requirements for the
         past 90 days. Yes  X   No
                           ---     ---

                  Indicate the number of shares outstanding of each of the
         issuer's classes of common stock, as of the latest practicable date.


                  COMMON STOCK, $1.00 PAR VALUE                1,000
                  -----------------------------                -----
                           (Class)                (outstanding at July 31, 2001)

================================================================================

<PAGE>   2


CITGO PETROLEUM CORPORATION

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

TABLE OF CONTENTS
--------------------------------------------------------------------------------


<Table>
<Caption>
                                                                                                               PAGE
<S>           <C>                                                                                              <C>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS..................................................................... 1

PART I.       FINANCIAL INFORMATION

   Item 1.    Financial Statements (Unaudited)

              Condensed Consolidated Balance Sheets - June 30, 2001 and December 31, 2000........................ 2

              Condensed Consolidated Statements of Income and Comprehensive Income -
              Three and Six-Month Periods Ended June 30, 2001 and 2000........................................... 3

              Condensed Consolidated Statement of Shareholder's Equity - Six-Month Period
              Ended June 30, 2001................................................................................ 4

              Condensed Consolidated Statements of Cash Flows - Six-Month Periods Ended
              June 30, 2001 and 2000............................................................................. 5

              Notes to the Condensed Consolidated Financial Statements........................................... 6

   Item 2.    Management's Discussion and Analysis of Financial Condition and
              Results of Operations............................................................................. 14

   Item 3.    Quantitative and Qualitative Disclosures About Market Risk........................................ 19

PART II.      OTHER INFORMATION

   Item 1.    Legal Proceedings................................................................................. 23

   Item 6.    Exhibits and Reports on Form 8-K.................................................................. 23

SIGNATURES...................................................................................................... 24
</Table>



<PAGE>   3


                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS


         This Quarterly Report on Form 10-Q contains certain "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Specifically, all statements under the caption "Item 2 - Management's Discussion
and Analysis of Financial Condition and Results of Operations" relating to
capital expenditures and investments related to environmental compliance,
strategic planning, purchasing patterns of refined products and capital
resources available to the Company (as defined herein) are forward looking
statements. In addition, when used in this document, the words "anticipate,"
"estimate," "prospect" and similar expressions are used to identify forward
looking statements. Such statements are subject to certain risks and
uncertainties, such as increased inflation, continued access to capital markets
and commercial bank financing on favorable terms, increases in regulatory
burdens, changes in prices or demand for the Company's products as a result of
competitive actions or economic factors and changes in the cost of crude oil,
feedstocks, blending components or refined products. Such statements are also
subject to the risks of increased costs in related technologies and such
technologies producing anticipated results. Should one or more of these risks or
uncertainties, among others, materialize, actual results may vary materially
from those estimated, anticipated or projected. Although CITGO believes that the
expectations reflected by such forward looking statements are reasonable based
on information currently available to the Company, no assurances can be given
that such expectations will prove to have been correct.


                                       1
<PAGE>   4


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                                              JUNE 30,
                                                                                                2001            DECEMBER 31,
                                                                                             (UNAUDITED)            2000
                                                                                             -----------        ------------
<S>                                                                                          <C>                <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                                                  $    49,792        $     17,777
  Accounts receivable, net                                                                     1,138,562           1,307,837
  Due from affiliates                                                                             27,832              37,622
  Inventories                                                                                  1,056,427             987,810
  Prepaid expenses and other                                                                       6,276               5,768
                                                                                             -----------        ------------
            Total current assets                                                               2,278,889           2,356,814

PROPERTY, PLANT AND EQUIPMENT - Net                                                            2,722,859           2,756,189

INVESTMENTS IN AFFILIATES                                                                        694,973             688,863

OTHER ASSETS                                                                                     208,255             196,312
                                                                                             -----------        ------------

                                                                                             $ 5,904,976        $  5,998,178
                                                                                             ===========        ============

LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:
  Short-term bank loans                                                                      $        --        $     37,500
  Accounts payable                                                                               705,849             843,057
  Payables to affiliates                                                                         414,351             524,288
  Taxes other than income                                                                        238,053             210,986
  Other                                                                                          192,112             283,654
  Current portion of long-term debt                                                               84,506              47,078
  Current portion of capital lease obligation                                                     19,274              26,649
                                                                                             -----------        ------------
            Total current liabilities                                                          1,654,145           1,973,212

LONG-TERM DEBT                                                                                   975,190           1,000,175

CAPITAL LEASE OBLIGATION                                                                          57,421              67,322

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                                      213,275             206,339

OTHER NONCURRENT LIABILITIES                                                                     207,026             190,050

DEFERRED INCOME TAXES                                                                            563,609             554,626

MINORITY INTEREST                                                                                 31,589              31,518

COMMITMENTS AND CONTINGENCIES (Note 6)

SHAREHOLDER'S EQUITY:
  Common stock - $1.00 par value, 1,000 shares authorized, issued and outstanding                      1                   1
  Additional capital                                                                           1,305,009           1,305,009
  Retained earnings                                                                              901,212             672,291
  Accumulated other comprehensive loss                                                            (3,501)             (2,365)
                                                                                             -----------        ------------
            Total shareholder's equity                                                         2,202,721           1,974,936
                                                                                             -----------        ------------

                                                                                             $ 5,904,976        $  5,998,178
                                                                                             ===========        ============
</Table>

See notes to condensed consolidated financial statements.


                                       2
<PAGE>   5


CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<Caption>
                                                                   THREE MONTHS                            SIX MONTHS
                                                                  ENDED JUNE 30,                          ENDED JUNE 30,
                                                          -------------------------------        --------------------------------
                                                              2001               2000                2001                2000
                                                          ------------       ------------        ------------        ------------
<S>                                                       <C>                <C>                 <C>                 <C>
REVENUES:
  Net sales                                               $  5,684,488       $  5,624,446        $ 10,576,986        $ 10,406,240
  Sales to affiliates                                           63,715             66,250             131,641             116,260
                                                          ------------       ------------        ------------        ------------
                                                             5,748,203          5,690,696          10,708,627          10,522,500
  Equity in earnings of affiliates                              35,940             (7,618)             60,021               3,027
  Other income (expense) - net                                   1,483               (141)                997                  81
                                                          ------------       ------------        ------------        ------------
                                                             5,785,626          5,682,937          10,769,645          10,525,608

COST OF SALES AND EXPENSES:
  Cost of sales and operating expenses
     (including purchases of $2,457,189, $2,697,886,
     $4,503,051 and $4,870,354 from affiliates)              5,462,848          5,556,184          10,275,211          10,270,445
  Selling, general and administrative expenses                  65,348             49,468             111,237              92,635
  Interest expense, excluding capital lease                     17,574             21,053              35,572              42,139
  Capital lease interest charge                                  2,406              2,866               4,813               5,733
  Minority interest                                                 37                701                  71               1,392
                                                          ------------       ------------        ------------        ------------
                                                             5,548,213          5,630,272          10,426,904          10,412,344
                                                          ------------       ------------        ------------        ------------

INCOME BEFORE INCOME TAXES AND CUMULATIVE
   EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                    237,413             52,665             342,741             113,264

INCOME TAXES                                                    87,842             19,486             126,820              41,908
                                                          ------------       ------------        ------------        ------------

INCOME BEFORE CUMULATIVE EFFECT OF
   CHANGE IN ACCOUNTING PRINCIPLE                              149,571             33,179             215,921              71,356

CUMULATIVE EFFECT, ACCOUNTING FOR DERIVATIVES,
   NET OF RELATED INCOME TAXES OF $7,625                            --                 --              13,000                  --
                                                          ------------       ------------        ------------        ------------

NET INCOME                                                     149,571             33,179             228,921              71,356
                                                          ------------       ------------        ------------        ------------

OTHER COMPREHENSIVE INCOME (LOSS):
   Cash flow hedges:
      Cumulative effect, accounting for derivatives, net
         of related income taxes of $(850)                          --                 --              (1,450)                 --

      Less: reclassification adjustment for derivative
         losses included in net income, net of related
         income taxes of $45 and $184                               77                 --                 314                  --
                                                          ------------       ------------        ------------        ------------

OTHER COMPREHENSIVE INCOME (LOSS)                                   77                 --              (1,136)                 --
                                                          ------------       ------------        ------------        ------------

COMPREHENSIVE INCOME                                      $    149,648       $     33,179        $    227,785        $     71,356
                                                          ============       ============        ============        ============
</Table>


See notes to condensed consolidated financial statements.


                                       3
<PAGE>   6


CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS)
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                                                ACCUMULATED
                                                                                                   OTHER
                                       COMMON STOCK           ADDITIONAL       RETAINED        COMPREHENSIVE
                                     SHARES      AMOUNT        CAPITAL         EARNINGS             LOSS               TOTAL
                                     -----       ------       ----------       ---------       -------------        -----------
<S>                                  <C>         <C>          <C>              <C>             <C>                  <C>
BALANCE, DECEMBER 31, 2000               1       $    1       $1,305,009       $ 672,291       $      (2,365)       $ 1,974,936

Net Income                              --           --               --         228,921                  --            228,921

Other comprehensive income (loss)       --           --               --              --              (1,136)            (1,136)

                                     -----       ------       ----------       ---------       -------------        -----------

BALANCE, JUNE 30, 2001                   1       $    1       $1,305,009       $ 901,212       $      (3,501)       $ 2,202,721
                                     =====       ======       ==========       =========       =============        ===========
</Table>


See notes to condensed consolidated financial statements.


                                       4
<PAGE>   7


CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                              SIX MONTHS
                                                                             ENDED JUNE 30,
                                                                     ----------------------------
                                                                        2001              2000
                                                                     ----------        ----------
<S>                                                                  <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                 $  143,851        $  351,233
                                                                     ----------        ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                                  (63,838)          (53,556)
  Proceeds from sales of property, plant and equipment                      337             3,949
  Decrease in restricted cash                                                --             3,015
  Investments in LYONDELL-CITGO Refining LP                              (5,700)           (4,700)
  Loans to LYONDELL-CITGO Refining LP                                        --           (25,130)
  Investments in and advances to other affiliates                          (303)           (8,000)
                                                                     ----------        ----------
            Net cash used in investing activities                       (69,504)          (84,422)
                                                                     ----------        ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net (repayments of) proceeds from short-term bank loans               (37,500)           18,000
  Net proceeds from (repayments of) revolving bank loans                 16,000          (345,000)
  Proceeds from issuance of tax-exempt bonds                             25,000                --
  Payments on taxable bonds                                             (25,000)               --
  Payments of capital lease obligations                                 (17,276)           (7,954)
  Repayments of other debt                                               (3,556)           (3,556)
                                                                     ----------        ----------
            Net cash used in financing activities                       (42,332)         (338,510)
                                                                     ----------        ----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         32,015           (71,699)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                           17,777            95,780
                                                                     ----------        ----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                             $   49,792        $   24,081
                                                                     ==========        ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for:
        Interest, net of amounts capitalized                         $   45,804        $   49,787
                                                                     ==========        ==========
        Income taxes, net of refund of $15,008 in 2000               $  184,300        $  (12,776)
                                                                     ==========        ==========
</Table>


See notes to condensed consolidated financial statements.


                                       5
<PAGE>   8


CITGO PETROLEUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2001 AND 2000
--------------------------------------------------------------------------------


1. BASIS OF PRESENTATION

      The financial information for CITGO Petroleum Corporation ("CITGO" or "the
      Company") subsequent to December 31, 2000 and with respect to the interim
      three-month and six-month periods ended June 30, 2001 and 2000 is
      unaudited. In the opinion of management, such interim information contains
      all adjustments, consisting only of normal recurring adjustments,
      necessary for a fair presentation of the results of such periods. The
      results of operations for the three-month and six-month periods ended June
      30, 2001 and 2000 are not necessarily indicative of the results to be
      expected for the full year. Reference is made to CITGO's Annual Report for
      the fiscal year ended December 31, 2000 on Form 10-K, dated March 21,
      2001, for additional information.

      The condensed consolidated financial statements include the accounts of
      CITGO, its wholly owned subsidiaries, and Cit-Con Oil Corporation, which
      is 65 percent owned by CITGO (collectively, "the Company").

2. CHANGE IN ACCOUNTING PRINCIPLE

      On January 1, 2001 the Company adopted Statement of Financial Accounting
      Standards No. 133, "Accounting for Derivative Instruments and Hedging
      Activities" ("SFAS No. 133"). The statement, as amended, establishes
      accounting and reporting standards for derivative instruments and for
      hedging activities. It requires that an entity recognize all derivatives,
      at fair value, as either assets or liabilities in the statement of
      financial position with an offset either to shareholder's equity and
      comprehensive income or income depending upon the classification of the
      derivative. Certain of the derivative instruments identified at January 1,
      2001, under the provisions of SFAS No. 133 had been previously designated
      in hedging relationships that addressed the variable cash flow exposure of
      forecasted transactions; under the transition provisions of SFAS No. 133,
      on January 1, 2001 the Company recorded an after-tax,
      cumulative-effect-type transition charge of $1.5 million to accumulated
      other comprehensive income related to these derivatives. Certain of the
      derivative instruments identified at January 1, 2001, under the provisions
      of SFAS No. 133 had been previously designated in hedging relationships
      that addressed the fair value of certain forward purchase and sale
      commitments; under the transition provisions of SFAS No. 133, on January
      1, 2001 the Company recorded fair value adjustments to the subject
      derivatives and related commitments resulting in the recording of a net
      after-tax, cumulative-effect-type transition charge of $0.2 million to net
      income. The remaining derivatives identified at January 1, 2001 under the
      provisions of SFAS No. 133, consisting of certain forward purchases and
      sales, had not previously been considered derivatives under accounting
      principles generally accepted in the United States of America; under the
      transition provisions of SFAS No. 133, on January 1, 2001 the Company
      recorded an after-tax, cumulative-effect-type benefit of $13.2 million to
      net income related to these derivatives.

      The Company did not elect subsequent hedge accounting for derivatives
      existing at January 1, 2001. Accordingly, all changes in the fair value of
      those derivatives have been recorded in income. Prospectively, the Company
      plans to elect hedge accounting only under limited circumstances involving
      derivatives with initial terms of 90 days or greater and notional amounts
      of $25 million or greater.


                                       6
<PAGE>   9


3. INVENTORIES

      Inventories, primarily at LIFO, consist of the following:

<Table>
<Caption>
                                                                     JUNE 30,
                                                                       2001           DECEMBER 31,
                                                                   (UNAUDITED)            2000
                                                                   ------------       ------------
                                                                             (000'S OMITTED)
<S>                                                                <C>                <C>
Refined products                                                   $    823,386       $    748,855
Crude oil                                                               166,722            175,455
Materials and supplies                                                   66,319             63,500
                                                                   ------------       ------------
                                                                   $  1,056,427       $    987,810
                                                                   ============       ============
</Table>

4. LONG-TERM DEBT AND FINANCING ARRANGEMENTS

<Table>
<S>                                                                <C>                <C>
Revolving bank loans                                               $    16,000        $        --

Senior Notes, $200 million face amount, due 2006 with
   interest rate of 7.875%                                             199,852            199,837

Private Placement Senior Notes, due 2001 to 2006 with
   interest rates from 9.03% to 9.30%                                   96,753             96,753

Master Shelf Agreement Senior Notes, due 2002 to
   2009 with interest rates from 7.17% to 8.94%                        260,000            260,000

Tax Exempt Bonds, due 2004 to 2031 with variable
   and fixed interest rates                                            334,520            309,520

Taxable Bonds, due 2026 to 2028 with variable interest rates           149,000            174,000

Cit-Con bank credit agreement                                            3,571              7,143
                                                                   -----------        -----------
                                                                     1,059,696          1,047,253
Current portion of long-term debt                                      (84,506)           (47,078)
                                                                   -----------        -----------
                                                                   $   975,190        $ 1,000,175
                                                                   ===========        ===========
</Table>


      On May 11, 2001, CITGO renewed its $150 million 364-day revolving bank
      loan facility for another term.

      On May 28, 2001, CITGO established an additional $25 million 364-day
      revolving bank loan facility.


                                       7
<PAGE>   10


5. INVESTMENT IN LYONDELL-CITGO REFINING LP

      LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a 265 MBPD
      refinery in Houston, Texas and is owned by subsidiaries of CITGO (41.25%)
      and Lyondell Chemical Company (58.75%) ("the Owners"). This refinery
      processes heavy crude oil supplied by Petroleos de Venezuela, S.A.
      ("PDVSA" which may also be used to refer to one or more of its
      subsidiaries) under a long-term supply contract that expires in 2017.
      CITGO purchases substantially all of the gasoline, diesel and jet fuel
      produced at the refinery under a long-term contract.

      On February 9, 2001, PDVSA notified LYONDELL-CITGO that effective February
      1, 2001, it had declared force majeure under the contract described above.
      Under a force majeure declaration, PDVSA may reduce the amount of crude
      oil that it would otherwise be required to supply under this agreement. If
      PDVSA reduces its delivery of crude oil, LYONDELL-CITGO may be required to
      use alternative sources to obtain its required supply of crude oil, which
      may result in reduced operating margins. As of June 30, 2001, PDVSA
      deliveries of crude oil to LYONDELL-CITGO have not been reduced due to
      PDVSA's declaration of force majeure.

      CITGO has notes receivable from LYONDELL-CITGO which total $35 million at
      June 30, 2001 and December 31, 2000. The notes bear interest at market
      rates and are due July 1, 2003. These notes are included in other assets
      in the accompanying consolidated balance sheets.

      CITGO accounts for its investment in LYONDELL-CITGO using the equity
      method of accounting and records its share of the net earnings of
      LYONDELL-CITGO based on allocations of income agreed to by the Owners.
      Information on CITGO's investment in LYONDELL-CITGO follows:


                                       8
<PAGE>   11

<Table>
<Caption>
                                                             June 30,           December 31,
                                                               2001                 2000
                                                          ---------------      --------------
                                                            (Unaudited)
                                                                     (000s omitted)
<S>                                                       <C>                  <C>
Carrying value of investment                              $       526,251      $      518,333
Notes receivable                                                   35,278              35,278
Participation interest                                                 41%                 41%

Summary of financial position:
   Current assets                                         $       261,000      $      310,000
   Non current assets                                           1,360,000           1,386,000
   Current liabilities                                            300,000             867,000
   Non current liabilities                                        775,000             321,000
   Member's equity                                                546,000             508,000
</Table>

<Table>
<Caption>
                                                                Six Months Ended June 30,
                                                          -------------------------------------
                                                               2001                   2000
                                                          --------------          -------------
                                                                       (Unaudited)
<S>                                                       <C>                     <C>
Equity in net income (loss)                               $       39,220          $      (5,711)
Cash distribution received                                        37,002                 23,137

Summary of operating results:
   Revenue                                                $    1,841,785          $   1,760,190
   Gross profit                                                  166,324                 55,692
   Net income (loss)                                             107,507                   (480)
</Table>



      On July 20, 2001, LYONDELL-CITGO completed a refinancing of its working
      capital revolver and its $450 million term bank loan which matures on
      September 14, 2001. The new 18-month term loan and working capital
      revolver will mature in January 2003.


                                       9
<PAGE>   12


6. COMMITMENTS AND CONTINGENCIES

      LITIGATION AND INJURY CLAIMS - Various lawsuits and claims arising in the
      ordinary course of business are pending against the Company. The Company
      records accruals for potential losses when, in management's opinion, such
      losses are probable and reasonably estimable. If known lawsuits and claims
      were to be determined in a manner adverse to the Company, and in amounts
      greater than the Company's accruals, then such determinations could have a
      material adverse effect on the Company's results of operations in a given
      reporting period. However, in management's opinion the ultimate resolution
      of these lawsuits and claims will not exceed, by a material amount, the
      amount of the accruals and the insurance coverage available to the
      Company. This opinion is based upon management's and counsel's current
      assessment of these lawsuits and claims. The most significant lawsuits and
      claims are discussed below.

      In May 1997, a fire occurred at CITGO's Corpus Christi refinery. No
      serious personal injuries were reported. Approximately 1,300 claims have
      been resolved for immaterial amounts. There are seventeen related lawsuits
      pending in Corpus Christi, Texas state court against CITGO on behalf of
      approximately 9,000 individuals alleging property damages, personal injury
      and punitive damages. None of these are presently scheduled for trial.

      A class action lawsuit is pending in Corpus Christi, Texas state court
      against CITGO which claims damages for reduced value of residential
      properties as a result of alleged air, soil and groundwater contamination.
      CITGO has purchased 275 adjacent properties included in the lawsuit and
      settled those related property damage claims. CITGO has contested an
      agreement that purported to provide for settlement of the remaining
      property damage claims for $5 million payable by it. Motions by CITGO and
      the plaintiffs for summary judgment related to the enforcement of this
      agreement are currently under consideration by the court.

      A lawsuit alleging wrongful death and personal injury filed in 1996
      against CITGO and other industrial facilities in Corpus Christi, Texas
      state court was brought by persons who claim that exposure to refinery
      hydrocarbon emissions have caused various forms of illness. The lawsuit is
      scheduled for trial in 2002.

      Litigation is pending in federal court in Lake Charles, Louisiana against
      CITGO by a number of current and former refinery employees and applicants
      asserting claims of racial discrimination in connection with CITGO's
      employment practices. A trial involving two plaintiffs resulted in
      verdicts for the Company. The Court granted the Company summary judgment
      with respect to another group of claims; this has been appealed to the
      Fifth Circuit Court of Appeals. No trials of the remaining cases are set
      pending this appeal.

      CITGO is among defendants to class action lawsuits in North Carolina, New
      York and Illinois alleging contamination of water supplies by methyl
      tertiary butyl ether ("MTBE"), a component of gasoline. These actions
      allege that MTBE poses public health risks and seek damages as well as
      remediation of the alleged contamination. These matters are in early
      stages of discovery. The Illinois case has been transferred to New York
      and consolidated with the case pending in New York. CITGO has denied all
      of the allegations and is pursuing its defenses.

      In 1999, a group of U.S. independent oil producers filed petitions under
      the U.S. antidumping and countervailing duty laws against imports of crude
      oil from Venezuela, Iraq, Mexico and Saudi Arabia. These laws provide for
      the imposition of additional duties on imports of merchandise if (1) the
      U.S. Department of Commerce ("DOC"), after investigation, determines that
      the merchandise


                                       10
<PAGE>   13


      has been sold to the United States at dumped prices or has benefited from
      countervailing subsidies, and (2) the U.S. International Trade Commission
      determines that the imported merchandise has caused or threatened material
      injury to the U.S. industry producing like product. The amount of the
      additional duties imposed is generally equal to the amount of the dumping
      margin and subsidies found on the imports on which the duties are
      assessed. No duties are owed on imports made prior to the formal
      initiation of an investigation by the DOC. In 1999, prior to initiation of
      a formal investigation, the DOC dismissed the petitions. In 2000, the U.S.
      Court of International Trade overturned this decision and remanded the
      case to the DOC for reconsideration.

      ENVIRONMENTAL COMPLIANCE AND REMEDIATION - CITGO is subject to various
      federal, state and local environmental laws and regulations which may
      require CITGO to take action to correct or improve the effects on the
      environment of prior disposal or release of petroleum substances by CITGO
      or other parties. Maintaining compliance with environmental laws and
      regulations in the future could require significant capital expenditures
      and additional operating costs.

      CITGO's accounting policy establishes environmental reserves as probable
      site restoration and remediation obligations become reasonably capable of
      estimation. Based on currently available information, including the
      continuing participation of former owners in remediation actions and
      indemnification agreements with third parties, CITGO believes that its
      accruals are sufficient to address its environmental cleanup obligations.

      In 1992, the Company reached an agreement with a state agency to cease
      usage of certain surface impoundments at the Company's Lake Charles
      refinery by 1994. A mutually acceptable closure plan was filed with the
      state in 1993. The Company and its former owner are participating in the
      closure and sharing the related costs based on estimated contributions of
      waste and ownership periods. The remediation commenced in December 1993.
      In 1997, the Company presented a proposal to a state agency revising the
      1993 closure plan. In 1998 and 2000, the Company submitted further
      revisions as requested by the state agency. A ruling on the proposal, as
      amended, is expected in 2001 with final closure to begin in 2002.

      In 1992, an agreement was reached between the Company and its former owner
      concerning a number of environmental issues which provides in part that
      the former owner will continue to share the costs of certain specific
      environmental remediation and certain tort liability actions based on
      ownership periods and specific terms of the agreement.

      The Texas Natural Resources Conservation Commission ("TNRCC") conducted
      environmental compliance reviews at the Corpus Christi refinery in 1998
      and 1999. TNRCC has issued Notices of Violation ("NOV") related to each of
      the reviews and has proposed fines of approximately $970,000 based on the
      1998 review and $700,000 based on the 1999 review. The first NOV was
      issued in January 1999 and the second NOV was issued in December 1999.
      Most of the alleged violations refer to recordkeeping and reporting
      issues, failure to meet required emission levels, and failure to properly
      monitor emissions. A hearing on the merits has been scheduled for November
      2001. The Company intends to vigorously contest the alleged violations and
      proposed fines.

      In June 1999, CITGO and numerous other industrial companies received
      notice from the U.S. Environmental Protection Agency, ("EPA") that the EPA
      believes these companies have contributed to contamination in the
      Calcasieu Estuary, in the proximity of Lake Charles, Calcasieu Parish,
      Louisiana and are Potentially Responsible Parties ("PRPs") under the
      Comprehensive Environmental Response, Compensation, and Liability Act
      ("CERCLA"). The EPA made a


                                       11
<PAGE>   14


      demand for payment of its past investigation costs from CITGO and other
      PRPs and is conducting a Remedial Investigation/Feasibility Study
      ("RI/FS") under its CERCLA authority. CITGO and other PRPs may be
      potentially responsible for the costs of the RI/FS. CITGO disagrees with
      the EPA's allegations and intends to contest this matter.

      In January 2001, CITGO received NOVs from the EPA alleging violations of
      the Federal Clean Air Act ("CAA"). The NOVs are an outgrowth of
      inspections and formal Information Requests regarding the Company's
      compliance with the CAA. The NOVs cover CITGO's Lake Charles, Louisiana
      and Corpus Christi, Texas refineries and a Lemont, Illinois refinery
      operated by CITGO. For the Lake Charles and Lemont facilities, the NOVs
      allege, among other things, violations of the "New Source Review" ("NSR")
      provisions of the CAA, which address installation and permitting of new
      and modified air emission sources. For the Corpus Christi facility, the
      NOV alleges violations of various monitoring, leak detection and repair
      requirements of the CAA. If the Company were to be found to have violated
      the provisions cited in the NOVs, it could be subject to possible
      penalties and capital expenditures for installation or upgrading of
      pollution control equipment or technologies. The likelihood of an
      unfavorable outcome and the amount or range of any potential loss cannot
      reasonably be estimated at this time.

      In October 1999, the Louisiana Department of Environmental Quality issued
      the Company a NOV and Potential Penalty alleging violation of benzene
      NESHAPS regulations covering benzene emissions from wastewater treatment
      operations at CITGO's Lake Charles, Louisiana refinery and requested
      additional information. The Company anticipates resolving this for an
      immaterial amount.

      Conditions which require additional expenditures may exist with respect to
      various Company sites including, but not limited to, CITGO's operating
      refinery complexes, closed refineries, service stations and crude oil and
      petroleum product storage terminals. The amount of such future
      expenditures, if any, is indeterminable.

      DERIVATIVE COMMODITY AND FINANCIAL INSTRUMENTS - CITGO enters into
      petroleum futures contracts, options and other over-the-counter commodity
      derivatives, primarily to reduce its inventory purchase and product sale
      exposure to market risk. In the normal course of business, CITGO also
      enters into certain petroleum commodity forward purchase and sale
      contracts which qualify as derivatives. At June 30, 2001, the balance
      sheet caption other current liabilities includes $9 million related to the
      fair values of open commodity derivatives.

      CITGO has also entered into various interest rate swaps to manage its risk
      related to interest rate changes on its debt. The fair value of the
      interest rate swap agreements in place at June 30, 2001, based on the
      estimated amount that CITGO would receive or pay to terminate the
      agreements as of that date and taking into account current interest rates,
      was a loss of $3 million, the offset of which is recorded in the balance
      sheet caption other current liabilities. In connection with the
      determination of fair market value, the Company considers the
      creditworthiness of the counterparties, but no adjustment was determined
      to be necessary as a result.


                                       12
<PAGE>   15


7. RELATED PARTY TRANSACTIONS

     CITGO's largest supplier of crude oil is PDVSA. CITGO has entered into
     long-term crude oil supply agreements with PDVSA with respect to the crude
     oil requirements for each of CITGO's refineries. These crude oil supply
     agreements contain force majeure provisions which entitle the supplier to
     reduce the quantity of crude oil and feedstocks delivered under the crude
     supply agreements under specified circumstances. On February 9, 2001, PDVSA
     notified CITGO that it had declared force majeure, effective February 1,
     2001, under each of the long-term crude oil supply agreements it has with
     CITGO. Under a force majeure declaration, PDVSA may reduce the amount of
     crude oil that it would otherwise be required to supply under these
     agreements. If PDVSA reduces its delivery of crude oil, CITGO may be
     required to use alternative sources to obtain their required supply of
     crude oil, which may result in reduced operating margins.

     As of June 30, 2001, PDVSA's deliveries of crude oil to CITGO have not been
     reduced due to PDVSA's declaration of force majeure. It is not possible for
     CITGO to forecast future financial impacts of this force majeure condition
     on CITGO's costs or the duration of the force majeure.


                                       13
<PAGE>   16


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

         The following discussion of the financial condition and results of
operations of CITGO should be read in conjunction with the unaudited condensed
consolidated financial statements of CITGO included elsewhere herein. Reference
is made to CITGO's Annual Report for the fiscal year ended December 31, 2000 on
Form 10-K, dated March 21, 2001, for additional information and a description of
factors which may cause substantial fluctuations in the earnings and cash flows
of CITGO.

         In the quarter ended June 30, 2001, CITGO generated net income of
$149.6 million on revenue of $5.8 billion compared to net income of $33.2
million on revenue of $5.7 billion for the same period last year. In the six
months ended June 30, 2001, CITGO generated net income of $228.9 on revenue of
$10.8 billion compared to net income of $71.4 million on revenue of $10.5
billion for the same period last year. (See "Gross margin").

RESULTS OF OPERATIONS

         The following table summarizes the sources of CITGO's sales revenues
and sales volumes for the three-month periods ended June 30, 2001 and 2000:


                        CITGO SALES REVENUES AND VOLUMES

<Table>
<Caption>
                                             THREE MONTHS           SIX MONTHS            THREE MONTHS           SIX MONTHS
                                             ENDED JUNE 30,        ENDED JUNE 30,        ENDED JUNE 30,        ENDED JUNE 30,
                                          -------------------   -------------------   -------------------   -------------------
                                            2001       2000       2001       2000       2001       2000       2001       2000
                                          --------   --------   --------   --------   --------   --------   --------   --------
                                            ($ in millions)        ($ in millions)        (MM gallons)         (MM gallons)
<S>                                       <C>        <C>        <C>        <C>           <C>        <C>        <C>        <C>
Gasoline                                  $  3,553   $  3,441   $  6,213   $  6,096      3,508      3,650      6,522      6,791
Jet fuel                                       456        440        938        934        564        571      1,137      1,182
Diesel/#2 fuel                               1,005      1,030      2,193      2,124      1,264      1,338      2,721      2,718
Asphalt                                        136        166        186        213        255        244        345        321
Petrochemicals and industrial products         430        461        850        852        581        430      1,107        816
Lubricants and waxes                           153        139        295        254         72         72        142        128
                                          --------   --------   --------   --------   --------   --------   --------   --------
        Total refined product sales          5,733      5,677     10,675     10,473      6,244      6,305     11,974     11,956
Other sales                                     15         14         34         50
                                          --------   --------   --------   --------   --------   --------   --------   --------
        Total sales                       $  5,748   $  5,691   $ 10,709   $ 10,523      6,244      6,305     11,974     11,956
                                          ========   ========   ========   ========   ========   ========   ========   ========
</Table>


                                       14
<PAGE>   17


         The following table summarizes CITGO's cost of sales and operating
expenses for the three-month and six-month periods ended June 30, 2001 and 2000:

                   CITGO COST OF SALES AND OPERATING EXPENSES

<Table>
<Caption>
                                                                THREE MONTHS            SIX MONTHS
                                                                ENDED JUNE 30,        ENDED JUNE 30,
                                                             -------------------   -------------------
                                                               2001       2000       2001       2000
                                                             --------   --------   --------   --------
                                                               ($ in millions)        ($ in millions)
<S>                                                          <C>        <C>        <C>        <C>
Crude oil                                                    $  1,139   $  1,332   $  2,210   $  2,458
Refined products                                                3,627      3,558      6,545      6,442
Intermediate feedstocks                                           400        373        648        650
Refining and manufacturing costs                                  238        223        491        431
Other operating costs, expenses and inventory changes              59         70        381        289
                                                             --------   --------   --------   --------
       Total cost of sales and operating expenses            $  5,463   $  5,556   $ 10,275   $ 10,270
                                                             ========   ========   ========   ========
</Table>


         Sales revenues and volumes. Sales increased $57 million, or
approximately 1%, in the three-month period ended June 30, 2001 as compared to
the same period in 2000. This was due to an increase in average sales price of
2% and a decrease in sales volume of 1%. Sales increased $186 million, or
approximately 2%, in the six-month period ended June 30, 2001 as compared to the
same period in 2000. This was due to an increase in average sales price of 2%
and an increase in sales volume of less than 1%. (See CITGO Sales Revenues and
Volumes table above.)

         Equity in earnings of affiliates. Equity in earnings of affiliates
increased by $44 million for the three-month period ended June 30, 2001 and
increased $57 million for the six-month period ended June 30, 2001 as compared
to the same periods in 2000. The increase was primarily due to the increase in
the earnings of LYONDELL-CITGO. CITGO's share of these earnings increased $36
million, from $(12) million in the second quarter of 2000 to $24 million in the
second quarter of 2001 and $44 million, from $(5) million in the first six
months of 2000 to $39 million in the first six months of 2001. LYONDELL-CITGO's
increased earnings in 2001 are primarily due to higher refining margins which
were partially offset by the impact of higher natural gas prices and lower crude
processing rates due to an unplanned production unit outage at the refinery. The
earnings for the first six months of 2000 were impacted by a major planned
turnaround which occurred during the second quarter of 2000.

         Cost of sales and operating expenses. Cost of sales and operating
expenses decreased by $93 million or 2%, in the quarter ended June 30, 2001 as
compared to the same period in 2000. Cost of sales and operating expenses
increased by $5 million or less than 1%, in the six months ended June 30, 2001
as compared to the same period in 2000. (See CITGO Cost of Sales and Operating
Expenses table above.)

         CITGO purchases refined products to supplement the production from its
refineries to meet marketing demands and resolve logistical issues. Refined
product purchases represented 66% and 64% of total cost of sales and operating
expenses for the second quarters of 2001 and 2000, respectively and 64% and 63%
for the first six months of 2001 and 2000, respectively. CITGO estimates that
margins on purchased products, on average, are lower than margins on produced
products due to the fact that CITGO can only receive the marketing portion of
the total margin received on the produced refined products. However, purchased
products are not segregated from CITGO produced products and margins may vary
due to market conditions and other factors beyond the Company's control. As
such, it is difficult to measure the effects on profitability of changes in
volumes of purchased products. In the near term, other than normal refinery
turnaround maintenance, CITGO does not anticipate operational actions or market
conditions which might cause a material change in anticipated purchased product
requirements; however, there could


                                       15
<PAGE>   18


be events beyond the control of CITGO which impact the volume of refined
products purchased. (See also "Factors Affecting Forward Looking Statements".)

         Gross margin. The gross margin for the three-month period ended June
30, 2001 was approximately 4.6 cents per gallon, compared to approximately 2.1
cents per gallon for the same period in 2000. The gross margin for the six-month
period ended June 30, 2001 was approximately 3.6 cents per gallon, compared to
approximately 2.1 cents per gallon for the same period in 2000. In the
three-month period ended June 30, 2001, the revenue per gallon component
increased approximately 2% while the cost per gallon component decreased
approximately 1%. As a result, the gross margin increased approximately 2.5
cents on a per gallon basis in the quarter ended June 30, 2001 compared to the
same period in 2000. In the six-month period ended June 30, 2001, the revenue
per gallon component increased approximately 2% while the cost per gallon
component remained flat. As a result, the gross margin increased approximately
1.5 cents on a per gallon basis in the six months ended June 30, 2001 compared
to the same period in 2000. These results reflect improved industry wide
refining and marketing margins. The improved margins and high refinery
throughput during the second quarter 2001 allowed CITGO to generate the higher
gross margins reported during the period.

         Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $49 million in the second quarter of 2000
to $65 million in the second quarter of 2001, or 33%. Selling, general and
administrative expenses increased from $93 million in the first six months of
2000 to $111 million in the same period in 2001, or 19%. The difference is
principally due to an increase in incentive compensation in 2001.

         Interest Expense. Interest expense decreased by $4 million in the
three-month period and $7 million in the six-month period ended June 30, 2001 as
compared to the same periods in 2000. This was primarily due to the lower
average amount outstanding under the revolving and short-term borrowing
facilities during the first six months of 2001 which was made possible by cash
flows from operating activities.

LIQUIDITY AND CAPITAL RESOURCES

         For the six-month period ended June 30, 2001, the Company's
consolidated net cash provided by operating activities totaled approximately
$144 million. Operating cash flows were derived from net income of $229 million,
depreciation and amortization of $123 million and changes in working capital
of $(208) million. The more significant changes in working capital included the
decrease in accounts receivable, including receivables from affiliates, of
approximately $177 million, the increase in inventories of approximately $69
million, the increase in other long-term assets of approximately $40 million,
the decrease in income taxes payable of approximately $51 million and the
decrease in accounts payable and other current liabilities, including payables
to affiliates, of approximately $247 million.

         Net cash used in investing activities totaled $70 million for the
six-month period ended June 30, 2001 consisting primarily of capital
expenditures of $64 million (compared to $54 million for the same period in
2000).

         Net cash used in financing activities totaled $42 million for the
six-month period ended June 30, 2001 consisting primarily of $38 million net
repayment on short-term borrowings and the payment of capital lease obligations
of $17 million, offset by $16 million in proceeds from revolving bank loans.

         On May 28, 2001, CITGO established an additional $25 million 364-day
revolving bank loan facility.

         On May 11, 2001, CITGO renewed its $150 million 364-day revolving bank
loan facility for another term.


                                       16
<PAGE>   19


         As of June 30, 2001, capital resources available to the Company
included cash generated by operations, available borrowing capacity under
CITGO's committed bank facilities of $559 million and $190 million of
uncommitted short-term borrowing facilities with various banks. Additionally,
the remaining $400 million from CITGO's shelf registration with the Securities
and Exchange Commission for $600 million of debt securities may be offered and
sold from time to time. CITGO management believes that the Company has
sufficient capital resources to carry out planned capital spending programs,
including regulatory and environmental projects in the near term, and to meet
currently anticipated future obligations as they arise. CITGO periodically
evaluates other sources of capital in the marketplace and anticipates that
long-term capital requirements will be satisfied with current capital resources
and future financing arrangements, including the issuance of debt securities.
The Company's ability to obtain such financing will depend on numerous factors,
including market conditions and the perceived creditworthiness of the Company at
that time.

         In April 2000, CITGO amended an agreement to sell trade accounts
receivable on an ongoing basis and without recourse. The amendment increased the
amount of such receivables that can be sold to $225 million. The amended
agreement was extended in April 2001 for one year and is renewable for
successive annual terms by mutual agreement.

         The Company is in compliance with its obligations under its debt
financing arrangements at June 30, 2001.

NEW ACCOUNTING STANDARDS

      On January 1, 2001 the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). The statement, as amended, establishes accounting
and reporting standards for derivative instruments and for hedging activities.
It requires that an entity recognize all derivatives, at fair value, as either
assets or liabilities in the statement of financial position with an offset
either to shareholder's equity and comprehensive income or income depending upon
the classification of the derivative. Certain of the derivative instruments
identified at January 1, 2001 under the provisions of SFAS No. 133 had been
previously designated in hedging relationships that addressed the variable cash
flow exposure of forecasted transactions; under the transition provisions of
SFAS No. 133, on January 1, 2001 the Company recorded an after-tax,
cumulative-effect-type transition charge of $1.5 million to accumulated other
comprehensive income related to these derivatives. Certain of the derivative
instruments identified at January 1, 2001, under the provisions of SFAS No. 133
had been previously designated in hedging relationships that addressed the fair
value of certain forward purchase and sale commitments; under the transition
provisions of SFAS No. 133, on January 1, 2001 the Company recorded fair value
adjustments to the subject derivatives and related commitments resulting in the
recording of a net after-tax, cumulative-effect-type transition charge of $0.2
million to net income. The remaining derivatives identified at January 1, 2001
under the provisions of SFAS No. 133, consisting of certain forward purchases
and sales, had not previously been considered derivatives under accounting
principles generally accepted in the United States of America; under the
transition provisions of SFAS No. 133, on January 1, 2001 the


                                       17
<PAGE>   20


Company recorded an after-tax, cumulative-effect-type benefit of $13.2 million
to net income related to these derivatives.

      The Company did not elect subsequent hedge accounting for derivatives
existing at January 1, 2001. Accordingly, all changes in the fair value of those
derivatives have been recorded in income. Prospectively, the Company plans to
elect hedge accounting only under limited circumstances involving derivatives
with initial terms of 90 days or greater and notional amounts of $25 million or
greater.

      In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS No. 141") which addresses financial accounting and reporting for business
combinations and requires that all business combinations initiated after June
30, 2001 be accounted for under the purchase method. Use of the pooling of
interests method is no longer permitted. The adoption of SFAS No. 141 will not
impact the Company's financial position or results of operations.

      In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") which is fully
effective in fiscal years beginning after December 15, 2001, although certain
provisions of SFAS No. 142 are applicable to goodwill and other intangible
assets acquired in transactions completed after June 30, 2001. SFAS No. 142
addresses financial accounting and reporting for acquired goodwill and other
intangible assets and requires that goodwill and intangibles with an indefinite
life no longer be amortized but instead be periodically reviewed for impairment.
The adoption of SFAS No. 142 will not impact the Company's financial position or
results of operations.

PROPOSED ACCOUNTING CHANGE

      The American Institute of Certified Public Accountants has issued a
"Statement of Position" exposure draft on cost capitalization that is expected
to require companies to expense the non-capital portion of major maintenance
costs as incurred. The statement is expected to require that any existing
deferred non-capital major maintenance costs be expensed immediately. This
statement also has provisions which will change the method of determining
depreciable lives. The impact on future depreciation expense is not determinable
at this time. The exposure draft indicates that this change will be required to
be adopted for fiscal years beginning after June 15, 2002, and that the effect
of expensing existing deferred major maintenance costs will be reported as a
cumulative effect of an accounting change in the consolidated statement of
income. At June 30, 2001, the Company had included turnaround costs of $93
million in other assets. Company management has not determined the amount, if
any, of these costs that could be capitalized under the provisions of the
exposure draft.


                                       18
<PAGE>   21


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Introduction. CITGO has exposure to price fluctuations of crude oil and
refined products as well as fluctuations in interest rates. To manage these
exposures, management has defined certain benchmarks consistent with its
preferred risk profile for the environment in which the Company operates and
finances its assets. CITGO does not attempt to manage the price risk related to
all of its inventories of crude oil and refined products. As a result, at June
30, 2001, CITGO was exposed to the risk of broad market price declines with
respect to a substantial portion of its crude oil and refined product
inventories. The following disclosures do not attempt to quantify the price risk
associated with such commodity inventories.

         Commodity Instruments. CITGO balances its crude oil and petroleum
product supply/demand and manages a portion of its price risk by entering into
petroleum commodity derivatives.

                  NON TRADING COMMODITY DERIVATIVES
                   OPEN POSITIONS AT JUNE 30, 2001

<Table>
<Caption>
                                                              MATURITY   CONTRACTED   CONTRACT       MARKET
    COMMODITY                       DERIVATIVE                  DATE       VOLUME       VALUE        VALUE
    ---------                       ----------                --------   ----------   --------     ---------
                                                                                         ($ in millions)
                                                                                      ----------------------
<S>                  <C>                                      <C>        <C>          <C>          <C>
No Lead Gasoline (1) Futures Purchased                           2001        299      $    9.3     $     9.2
                     Futures Sold                                2001        815      $   27.0     $    24.2
                     OTC Swaps (Pay Floating/Receive Fixed)(3)   2001        200      $     --     $    (0.4)
                     Forward Purchase Contracts                  2001      6,014      $  194.5     $   163.6
                     Forward Sale Contracts                      2001      6,086      $  195.7     $   167.8

Distillates (1)      Futures Purchased                           2001      1,697      $   54.6     $    52.3
                     Futures Purchased                           2002        720      $   22.2     $    21.9
                     OTC Swap Options Purchased                  2001         10      $     --     $      --
                     OTC Swap Options Sold                       2001         10      $     --     $      --
                     OTC Swap Options Purchased                  2002         30      $     --     $      --
                     OTC Swap Options Sold                       2002         30      $     --     $      --
                     Forward Purchase Contracts                  2001      1,092      $   34.3     $    32.1
                     Forward Sale Contracts                      2001      1,482      $   46.2     $    44.9

Crude Oil (1)        Futures Purchased                           2001        947      $   26.2     $    24.7
                     Forward Purchase Contracts                  2001      6,165      $  174.0     $   163.7
                     Forward Sale Contracts                      2001      6,929      $  192.8     $   183.9

Natural Gas (2)      Futures Purchased                           2001         85      $    3.4     $     2.9
                     OTC Swap Options Purchased                  2001        240      $     --     $     0.1
                     OTC Swap Options Sold                       2001        140      $     --     $    (1.3)
</Table>

----------
(1) Thousands of barrels
(2) Ten-thousands of mmbtu
(3) Floating price based on market index designated in contract; fixed price
    agreed upon at date of contract.


                                       19
<PAGE>   22


                  NON TRADING COMMODITY DERIVATIVES
                   OPEN POSITIONS AT JUNE 30, 2000

<Table>
<Caption>
                                                                    MATURITY   NUMBER OF    CONTRACT       MARKET
    COMMODITY                       DERIVATIVE                        DATE     CONTRACTS     VALUE(2)      VALUE
    ---------                       ----------                      --------   ----------   --------     ---------
                                                                                                ($ in millions)
                                                                                            ----------------------
<S>                  <C>                                            <C>        <C>          <C>          <C>
No Lead Gasoline (1) Futures Sold                                     2000         100      $    4.1     $     4.2
                     OTC Swap Options Purchased                       2000         500      $     --     $      --
                     OTC Swap Options Sold                            2000         500      $     --     $      --
                     OTC Swaps (Pay Floating/Receive Fixed)(4)        2000       1,500      $   55.7     $    58.6

Heating Oil (1)      Futures Purchased                                2000         188      $    9.0     $    10.1
                     Futures Purchased                                2001         337      $    6.9     $     7.6
                     Futures Sold                                     2000          25      $    0.9     $     0.9
                     OTC Swaps (Pay Floating/Receive Fixed)(4)        2000          29      $    0.8     $     0.6

Crude Oil (1)        Futures Sold                                     2000         300      $    9.2     $     9.8
                     OTC Swaps (Pay Floating/Receive Fixed)(4)        2000       3,400      $  104.9     $   110.5

Natural Gas (3)      Futures Purchased                                2000          23      $    0.9     $     1.0
</Table>

----------
(1) 1000 barrels per contract
(2) Weighted average price
(3) 10,000 mmbtu per contract
(4) Floating price based on market index designated in contract; fixed price
    agreed upon at date of contract.


                                       20
<PAGE>   23


         Debt Related Instruments. CITGO has fixed and floating U.S. currency
denominated debt. CITGO uses interest rate swaps to manage its debt portfolio
toward a benchmark of 40 to 60 percent fixed rate debt to total fixed and
floating rate debt. These instruments have the effect of changing the interest
rate with the objective of minimizing CITGO's long-term costs. At June 30, 2001,
CITGO's primary exposures were to LIBOR and floating rates on tax exempt bonds.

         For interest rate swaps, the table below presents notional amounts and
interest rates by expected (contractual) maturity dates. Notional amounts are
used to calculate the contractual payments to be exchanged under the contracts.


                      NON TRADING INTEREST RATE DERIVATIVES
                    OPEN POSITIONS AT JUNE 30, 2001 AND 2000

<Table>
<Caption>
                                                                  NOTIONAL
                                 EXPIRATION       FIXED RATE     PRINCIPAL
VARIABLE RATE INDEX                 DATE             PAID          AMOUNT
-------------------             -------------     ----------     ---------
                                                               ($ in millions)
<S>                             <C>               <C>            <C>
J.J. Kenny                      February 2005           5.30%        12
J.J. Kenny                      February 2005           5.27%        15
J.J. Kenny                      February 2005           5.49%        15
                                                                   ----
                                                                   $ 42
                                                                   ====
</Table>

         The fair value of the interest rate swap agreements in place at June
30, 2001, based on the estimated amount that CITGO would receive or pay to
terminate the agreements as of that date and taking into account current
interest rates, was a loss of $3 million.


                                       21
<PAGE>   24


         For debt obligations, the table below presents principal cash flows and
related weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on implied forward rates in the yield curve at
the reporting date.


                                DEBT OBLIGATIONS
                                AT JUNE 30, 2001

<Table>
<Caption>
                                                                                           EXPECTED
                                   FIXED         AVERAGE FIXED        VARIABLE         AVERAGE VARIABLE
  EXPECTED MATURITIES            RATE DEBT       INTEREST RATE        RATE DEBT         INTEREST RATE
  -------------------            ---------       -------------        ---------        ----------------
                              ($ in millions)                      ($ in millions)
<S>                              <C>             <C>                  <C>              <C>
          2001                   $      40           9.11%            $       4             4.67%
          2002                          36           8.78%                   16             5.01%
          2003                          61           8.79%                   --               --
          2004                          31           8.02%                   16             6.41%
          2005                          11           9.30%                   --               --
       Thereafter                      381           7.99%                  464             8.37%
                                 ---------          -----             ---------           ------
         Total                   $     560           8.23%            $     500             8.17%
                                 =========          =====             =========           ======

       Fair Value                $     574                            $     500
                                 =========                            =========
</Table>

                                DEBT OBLIGATIONS
                                AT JUNE 30, 2000

<Table>
<Caption>
                                                                                           EXPECTED
                                   FIXED         AVERAGE FIXED        VARIABLE         AVERAGE VARIABLE
  EXPECTED MATURITIES            RATE DEBT       INTEREST RATE        RATE DEBT         INTEREST RATE
  -------------------            ---------       -------------        ---------        ----------------
                              ($ in millions)                      ($ in millions)
<S>                              <C>             <C>                  <C>              <C>
          2000                   $      40           9.11%            $      38             7.04%
          2001                          40           9.11%                    7             7.46%
          2002                          36           8.78%                   --               --
          2003                          61           8.79%                   --               --
          2004                          31           8.02%                   16             8.52%
       Thereafter                      391           8.02%                  465             9.29%
                                 ---------          -----             ---------           ------
         Total                   $     599           8.29%            $     526             9.08%
                                 =========          =====             =========           ======

       Fair Value                $     592                            $     526
                                 =========                            =========
</Table>


                                       22
<PAGE>   25


                           PART II. OTHER INFORMATION




ITEM 1.  LEGAL PROCEEDINGS

      The required information is incorporated by reference into Part II of this
Report from Note 6 of the Notes to the Condensed Consolidated Financial
Statements included in Part I of this Report.








ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K



      (a)  Exhibits

              None.

      (b)  Reports on Form 8-K:

              None.


                                       23
<PAGE>   26


                                   SIGNATURES



         Pursuant to the requirements of the Securities Act of 1934, the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.



                           CITGO PETROLEUM CORPORATION







      Date:   August 9, 2001                  /s/ Larry E. Krieg
                                        ----------------------------------------
                                                  Larry E. Krieg
                                          Controller (Chief Accounting Officer)



                                       24