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

                                  United States

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                    FORM 10-Q


          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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 April 30, 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 MARCH 31, 2001

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


<TABLE>
<CAPTION>
                                                                                                               PAGE
<S>                                                                                                            <C>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS......................................................................1

PART I.       FINANCIAL INFORMATION

Item 1.       Financial Statements (Unaudited)

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

              Condensed Consolidated Statements of Income and Comprehensive Income - Three-Month Periods Ended
              March 31, 2001 and 2000............................................................................ 3

              Condensed Consolidated Statement of Shareholder's Equity - Three-Month Period
              Ended March 31, 2001............................................................................... 4

              Condensed Consolidated Statements of Cash Flows - Three-Month Periods Ended
              March 31, 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........................................ 18

PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings................................................................................. 22

Item 6.       Exhibits and Reports on Form 8-K.................................................................. 22

SIGNATURES ..................................................................................................... 23
</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>
------------------------------------------------------------------------------------------------------------------------
                                                                                              MARCH 31,     DECEMBER 31,
                                                                                                2001            2000
                                                                                             (UNAUDITED)
                                                                                             -----------    ------------
<S>                                                                                        <C>              <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                                                $    24,279      $    17,777
  Accounts receivable, net                                                                   1,014,844        1,307,837
  Due from affiliates                                                                           31,413           37,622
  Inventories                                                                                  857,290          987,810
  Prepaid expenses and other                                                                    12,338            5,768
                                                                                           -----------      -----------
            Total current assets                                                             1,940,164        2,356,814

PROPERTY, PLANT AND EQUIPMENT - Net                                                          2,737,445        2,756,189

INVESTMENTS IN AFFILIATES                                                                      690,021          688,863

OTHER ASSETS                                                                                   216,216          196,312
                                                                                           -----------      -----------
                                                                                           $ 5,583,846      $ 5,998,178
                                                                                           ===========      ===========
LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:
  Short-term bank loans                                                                    $        --      $    37,500
  Accounts payable                                                                             607,234          843,057
  Payables to affiliates                                                                       386,928          524,288
  Taxes other than income                                                                      232,438          210,986
  Other                                                                                        214,652          283,654
  Current portion of long-term debt                                                             70,292           47,078
  Current portion of capital lease obligation                                                   18,248           26,649
                                                                                           -----------      -----------
            Total current liabilities                                                        1,529,792        1,973,212

LONG-TERM DEBT                                                                                 975,183        1,000,175

CAPITAL LEASE OBLIGATION                                                                        67,322           67,322

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                                    209,813          206,339

OTHER NONCURRENT LIABILITIES                                                                   190,637          190,050

DEFERRED INCOME TAXES                                                                          526,474          554,626

MINORITY INTEREST                                                                               31,552           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                                                                            751,641          672,291
  Accumulated other comprehensive loss                                                          (3,578)          (2,365)
                                                                                           -----------      -----------
            Total shareholder's equity                                                       2,053,073        1,974,936
                                                                                           -----------      -----------
                                                                                           $ 5,583,846      $ 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
                                                                                      ENDED MARCH 31,
                                                                                      ---------------
                                                                                   2001             2000
                                                                                   ----             ----
<S>                                                                             <C>              <C>
REVENUES:
  Net sales                                                                     $ 4,892,498      $ 4,781,794
  Sales to affiliates                                                                67,926           50,010
                                                                                -----------      -----------
                                                                                  4,960,424        4,831,804
  Equity in earnings of affiliates                                                   24,081           10,645
  Other income (expense) - net                                                         (486)             222
                                                                                -----------      -----------
                                                                                  4,984,019        4,842,671
COST OF SALES AND EXPENSES:
  Cost of sales and operating expenses (including purchases
     of $2,045,862 and $2,172,468 from affiliates)                                4,812,363        4,714,261
  Selling, general and administrative expenses                                       45,889           43,167
  Interest expense, excluding capital lease                                          17,998           21,086
  Capital lease interest charge                                                       2,407            2,867
  Minority interest                                                                      34              691
                                                                                -----------      -----------
                                                                                  4,878,691        4,782,072
                                                                                -----------      -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
   EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                                         105,328           60,599

INCOME TAXES                                                                         38,978           22,422
                                                                                -----------      -----------
INCOME BEFORE CUMULATIVE EFFECT OF
   CHANGE IN ACCOUNTING PRINCIPLE                                                    66,350           38,177

CUMULATIVE EFFECT, ACCOUNTING FOR DERIVATIVES,
   NET OF RELATED INCOME TAXES OF $7,625                                             13,000               --
                                                                                -----------      -----------
NET INCOME                                                                           79,350           38,177
                                                                                -----------      -----------
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 $139                             237               --
                                                                                -----------      -----------
OTHER COMPREHENSIVE INCOME (LOSS)                                                    (1,213)              --
                                                                                -----------      -----------
COMPREHENSIVE INCOME                                                            $    78,137      $    38,177
                                                                                ===========      ===========

</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                                        --            --            --        79,350            --         79,350

Other comprehensive income (loss)                 --            --            --            --        (1,213)        (1,213)

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

BALANCE, MARCH 31, 2001                            1   $         1   $ 1,305,009   $   751,641   $    (3,578)   $ 2,053,073
                                         ===========   ===========   ===========   ===========   ===========    ===========
</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>
----------------------------------------------------------------------------------------
                                                                     THREE MONTHS
                                                                    ENDED MARCH 31,
                                                                ------------------------
                                                                  2001           2000
                                                                ---------      ---------
<S>                                                             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES                            $  86,150      $ 169,475
                                                                ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                            (30,680)       (26,749)
  Proceeds from sales of property, plant and equipment                108          3,735
  Decrease in restricted cash                                          --          3,015
  Investments in LYONDELL-CITGO Refining LP                        (1,300)            --
  Loans to LYONDELL-CITGO Refining LP                                  --         (2,700)
  Investments in and advances to other affiliates                     (96)        (5,500)
                                                                ---------      ---------
            Net cash used in investing activities                 (31,968)       (28,199)
                                                                ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net (repayments) proceeds from short-term bank loans            (37,500)       131,000
  Net repayments of revolving bank loans                               --       (345,000)
  Proceeds from issuance of tax-exempt bonds                       25,000             --
  Payments on taxable bonds                                       (25,000)            --
  Payments of capital lease obligations                            (8,402)            --
  Repayments of other debt                                         (1,778)        (1,778)
                                                                ---------      ---------
            Net cash used in financing activities                 (47,680)      (215,778)
                                                                ---------      ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    6,502        (74,502)

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

CASH AND CASH EQUIVALENTS, END OF PERIOD                        $  24,279      $  21,278
                                                                =========      =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for:
        Interest, net of amounts capitalized                    $  17,662      $  15,748
                                                                =========      =========
        Income taxes                                            $ 111,808      $      31
                                                                =========      =========
</TABLE>



See notes to condensed consolidated financial statements.



                                       5
<PAGE>   8



CITGO PETROLEUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE-MONTH PERIODS ENDED MARCH 31, 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 periods ended March 31, 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 periods ended March 31, 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>
                                                         MARCH 31,      DECEMBER 31,
                                                           2001            2000
                                                        (UNAUDITED)
                                                        -----------     ------------
                                                             (000's OMITTED)
<S>                                                     <C>             <C>
Refined products                                        $   645,756     $    748,855
Crude oil                                                   147,414          175,455
Materials and supplies                                       64,120           63,500
                                                        -----------     ------------
                                                        $   857,290     $    987,810
                                                        -----------     ------------
</TABLE>


4. LONG-TERM DEBT


<TABLE>
<CAPTION>
                                                                     MARCH 31,          DECEMBER 31,
                                                                       2001                2000
                                                                    (UNAUDITED)
                                                                    -----------         -----------
                                                                           (000's OMITTED)
<S>                                                                 <C>                 <C>
Senior Notes, $200 million face amount, due 2006 with
   interest rate of 7.875%                                          $   199,845         $   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                                             5,357               7,143
                                                                    -----------         -----------
                                                                      1,045,475           1,047,253
Current portion of long-term debt                                       (70,292)            (47,078)
                                                                    -----------         -----------
                                                                    $   975,183         $ 1,000,175
                                                                    ===========         ===========
</TABLE>



                                       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 March 31, 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
      March 31, 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>
                                                                                          MARCH 31,                 DECEMBER 31,
                                                                                            2001                        2000
                                                                                         ----------                 ------------
                                                                                         (UNAUDITED)
                                                                                                       (000s OMITTED)
<S>                                                                                  <C>             <C>
Carrying value of investment                                                              $  519,159                $  518,333
Notes receivable                                                                              35,278                    35,278
Participation interest                                                                            41%                       41%

Summary of financial position:
   Current assets                                                                         $  321,000                $  310,000
   Non current assets                                                                      1,364,000                 1,386,000
   Current liabilities                                                                       837,000                   867,000
   Non current liabilities                                                                   323,000                   321,000
   Member's equity                                                                           526,000                   508,000
</TABLE>


<TABLE>
<CAPTION>
                                                                                              THREE MONTHS ENDED MARCH 31,
                                                                                            ----------------------------------
                                                                                              2001                      2000
                                                                                            --------                  --------
                                                                                                       (UNAUDITED)
<S>                                                                                       <C>                       <C>
Equity in net income                                                                      $   14,898                $    6,276
Cash distribution received                                                                    15,372                    23,137

Summary of operating results:
   Revenue                                                                                $  910,117                $  859,288
   Gross profit                                                                               71,999                    47,873
   Net income                                                                                 41,824                    21,810
</TABLE>


LYONDELL-CITGO has a $450 million term credit facility and a $70 million
revolving credit facility that are due in September 2001. The Owners are
currently pursuing a refinancing of the indebtedness. CITGO management believes
that this debt will be refinanced.


                                       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 Untied 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; this has been appealed.

     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 March 31, 2001, the balance sheet captions
     prepaid expenses and other current assets and other current liabilities
     include $3 million and $1 million, respectively, 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 March 31, 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 March 31, 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.

         These contracts also contain provisions which entitle the supplier to
         reduce the quantity of crude oil and feedstocks delivered under the
         crude supply agreements and oblige the supplier to pay CITGO the deemed
         margin under that contract for each barrel of reduced crude oil and
         feedstocks. During the three-month periods ended March 31, 2001 and
         2000, PDVSA did not deliver naphtha pursuant to two of the contracts
         and, as a result, naphtha costs, net of deemed margin, were higher by
         $2 million and $1 million, respectively, than what would have otherwise
         been the case.




                                       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 first quarter ended March 31, 2001, CITGO generated net income
of $79.4 million on revenue of $5.0 billion compared to net income of $38.2
million on revenues of $4.8 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 March 31, 2001 and 2000:


                        CITGO SALES REVENUES AND VOLUMES


<TABLE>
<CAPTION>
                                                         THREE MONTHS                     THREE MONTHS
                                                        ENDED MARCH 31,                   ENDED MARCH 31,
                                                      -------------------                ----------------
                                                        2001       2000                    2001     2000
                                                        ----       ----                    ----     ----
                                                        ($ in millions)                    (MM gallons)
<S>                                                   <C>          <C>                   <C>        <C>
Gasoline                                              $ 2,660      $2,655                3,014      3,141
Jet fuel                                                  482         494                  573        611
Diesel/#2 fuel                                          1,188       1,094                1,457      1,380
Asphalt                                                    50          47                   90         77
Petrochemicals and industrial products                    420         391                  526        386
Lubricants and waxes                                      142         115                   70         56
                                                      -------      ------                -----      -----
        Total refined product sales                     4,942       4,796                5,730      5,651
Other sales                                                18          36
                                                      -------      ------                -----      -----
        Total sales                                   $ 4,960      $4,832                5,730      5,651
                                                      =======      ======                =====      =====
</TABLE>




                                       14
<PAGE>   17
     The following table summarizes CITGO's cost of sales and operating expenses
for the three-month periods ended March 31, 2001 and 2000:


                   CITGO COST OF SALES AND OPERATING EXPENSES


<TABLE>
<CAPTION>
                                                                                      THREE MONTHS
                                                                                    ENDED MARCH 31,
                                                                                 ---------------------
                                                                                  2001           2000
                                                                                  ----           ----
                                                                                    ($ IN MILLIONS)
<S>                                                                              <C>           <C>
Crude oil                                                                        $ 1,071       $ 1,126
Refined products                                                                   2,918         2,884
Intermediate feedstocks                                                              248           277
Refining and manufacturing costs                                                     253           208
Other operating costs, expenses and inventory changes                                322           219
                                                                                 -------       -------
       Total cost of sales and operating expenses                                $ 4,812       $ 4,714
                                                                                 =======       =======
</TABLE>



         Sales revenues and volumes. Sales increased $129 million, or
approximately 3%, in the three-month period ended March 31, 2001 as compared to
the same period in 2000. This was due to an increase in average sales price of
1% and an increase in sales volume of 1%. (See CITGO Sales Revenues and Volumes
table above.)

         Equity in earnings of affiliates. Equity in earnings of affiliates
increased by $13 million for the three-month period ended March 31, 2001 as
compared to the same period in 2000. The increase was primarily due to the
change in the earnings of LYONDELL-CITGO. CITGO's share of these earnings
increased $9 million, from $6 million in the first three months of 2000 to $15
million in the first three months of 2001. LYONDELL-CITGO's increased earnings
are primarily due to higher receipts and processing of crude oil under the crude
supply agreement with POVSA as well as higher margins on spot crude oil,
partially offset by higher energy costs and interest expense.

         Cost of sales and operating expenses. Cost of sales and operating
expenses increased by $98 million or 2%, in the quarter ended March 31, 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 61% of total cost of sales and operating expenses
for the first quarters of both 2001 and 2000. 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 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 March
31, 2001 was approximately 2.6 cents per gallon, compared to approximately 2.1
cents per gallon for the same period in


                                       15
<PAGE>   18




2000. In the three-month period ended March 31, 2001, both the revenue per
gallon component and the cost per gallon component increased approximately 1%.
As a result, the gross margin increased approximately one-half of one cent on a
per gallon basis in the quarter ended March 31, 2001 compared to the same period
in 2000.

         Selling, general and administrative expenses. Selling, general and
administrative expenses increased in the first quarter of 2001 by 6%, from $43
million in the first quarter of 2000 to $46 million in the first quarter of
2001. The difference is principally due to the recovery of approximately $5
million of bad debt reserves related to credit card receivables in the first
quarter of 2000. The recovery was in connection with the sale of CITGO's
proprietary consumer credit card receivables and related credit card program on
March 1, 2000 as described below.

         Interest Expense. Interest expense decreased by $3 million in the
three-month period ended March 31, 2001 as compared to the same period in 2000.
This was primarily due to the lower average amount outstanding under the
revolving and short-term borrowing facilities during the first quarter of 2001
which was made possible by cash flows from operating activities.

LIQUIDITY AND CAPITAL RESOURCES

         For the three-month period ended March 31, 2001, the Company's
consolidated net cash provided by operating activities totaled approximately $86
million. Operating cash flows were derived from net income of $79 million,
depreciation and amortization of $62 million, and changes in working capital of
$(55) million. The more significant changes in working capital included the
decrease in accounts receivable, including receivables from affiliates, of
approximately $298 million, the decrease in inventories of approximately $131
million and the decrease in accounts payable and other current liabilities,
including payables to affiliates, of approximately $386 million.

         Net cash used in investing activities totaled $32 million for the
three-month period ended March 31, 2001 consisting primarily of capital
expenditures of $31 million (compared to $27 million for the same period in
2000).

         Net cash used in financing activities totaled $48 million for the
three-month period ended March 31, 2001 consisting primarily of $38 million net
repayment on short-term borrowings and the payment of capital lease obligations
of $8 million.

         As of March 31, 2001, capital resources available to the Company
included cash generated by operations, available borrowing capacity under
CITGO's committed bank facilities of $550 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.

         On March 1, 2000, CITGO sold its proprietary consumer credit card
receivables and related credit card program to Associates First Capital
Corporation ("Associates"). In this transaction, Associates acquired
approximately $19 million in receivables from CITGO and $113 million from Royal
Bank of Canada which had previously been purchased from CITGO under a revolving
sale facility. In addition, Associates acquired 1.2 million active consumer
accounts. The sale did not affect CITGO's commercial or fleet credit card
programs.

         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 has a minimum term of one year and is renewable for successive annual
terms by mutual agreement.


                                       16
<PAGE>   19
         The Company is in compliance with its obligations under its debt
financing arrangements at March 31, 2001.

NEW ACCOUNTING STANDARD

         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.

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 years beginning after December 15, 2001, and will be reported as
a cumulative effect of an accounting change in the consolidated statement of
income. At March 31, 2001, the Company had included turnaround costs of $96
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.

                                       17
<PAGE>   20


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 March
31, 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 MARCH 31, 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        2,007        $  75.6     $  76.7
                        Forward Purchase Contracts           2001        3,752        $ 132.3     $ 132.7
                        Forward Sale Contracts               2001        2,975        $ 104.8     $ 106.3

Distillates (1)         Futures Purchased                    2001        1,171        $  34.6     $  34.8
                        Futures Purchased                    2002          299        $   9.0     $   9.0
                        OTC Swap Options Purchased           2001           10        $    --     $    --
                        OTC Swap Options Sold                2001           10        $    --     $    --
                        OTC Swap Options Purchased           2002           30        $    --     $    --
                        OTC Swap Options Sold                2002           30        $    --     $  (0.1)
                        Forward Purchase Contracts           2001        1,174        $  34.8     $  34.3
                        Forward Sale Contracts               2001        1,419        $  42.9     $  42.8

Crude Oil (1)           Futures Purchased                    2001          200        $   5.3     $   5.3
                        Forward Purchase Contracts           2001        7,254        $ 201.7     $ 190.0
                        Forward Sale Contracts               2001        8,295        $ 230.8     $ 217.3

Natural Gas (2)         Futures Purchased                    2001           40        $   2.1     $   2.0
                        OTC Swap Options Purchased           2001          100        $    --     $   0.3
                        OTC Swap Options Sold                2001          120        $    --     $  (0.4)

</TABLE>
----------
(1)   Thousands of barrels
(2)   Ten-thousands of mmbtu




                                       18
<PAGE>   21



                        NON TRADING COMMODITY DERIVATIVES
                        OPEN POSITIONS AT MARCH 31, 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 Purchased                                2000           69         $ 2.5      $ 2.5
                         Futures Sold                                     2000           60         $ 2.1      $ 2.2
                         OTC Swap Options Purchased                       2000        1,500         $(0.5)     $  --
                         OTC Swap Options Sold                            2000        1,500         $ 0.5      $(0.1)
                         OTC Swaps (Pay Floating/Receive Fixed)(4)        2000          500         $14.0      $16.6

Heating Oil (1)          Futures Purchased                                2000           71         $ 1.8      $ 2.0
                         Futures Purchased                                2001           19         $ 0.5      $ 0.5
                         Futures Sold                                     2000           75         $ 2.4      $ 2.5
                         OTC Swaps (Pay Floating/Receive Fixed)(4)        2000          400         $ 9.7      $11.5
                         OTC Swaps (Pay Fixed/Receive Floating)(4)        2000           10         $ 0.2      $ 0.3

Crude Oil (1)            OTC Swaps (Pay Fixed/Receive Floating)(4)        2000          900         $21.0      $23.8

Natural Gas (3)          Futures Purchased                                2000           15         $ 0.4      $ 0.4
</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.



                                       19
<PAGE>   22



         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 March 31,
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 MARCH 31, 2001

<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>


                      NON TRADING INTEREST RATE DERIVATIVES
                        OPEN POSITIONS AT MARCH 31, 2000


<TABLE>
<CAPTION>

                                                                               NOTIONAL
                                  EXPIRATION              FIXED RATE           PRINCIPAL
 VARIABLE RATE INDEX                 DATE                    PAID               AMOUNT
 -------------------              ----------              ----------           ---------
                                                                            ($ in millions)
<S>                             <C>                       <C>                  <C>
One-month LIBOR                 May 2000                        6.28%            $ 25
J.J. Kenny                      May 2000                        4.72%              25
J.J. Kenny                      February 2005                   5.30%              12
J.J. Kenny                      February 2005                   5.27%              15
J.J. Kenny                      February 2005                   5.49%              15
                                                                                 ----
                                                                                 $ 92
                                                                                 ====
</TABLE>


         The fair value of the interest rate swap agreements in place at March
31, 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.



                                       20
<PAGE>   23

         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 MARCH 31, 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%                   $  5             5.52%
          2002                     36             8.78%                     --               --
          2003                     61             8.79%                     --               --
          2004                     31             8.02%                     16             6.71%
          2005                     11             9.30%                     --               --
       Thereafter                 381             7.99%                    465             8.49%
                                -----             ----                    ----             ----
         Total                  $ 560             8.23%                   $486             8.40%
                                =====             ====                    ====             ====

       Fair Value               $ 576                                     $486
                                =====                                     ====
</TABLE>





                                DEBT OBLIGATIONS
                                AT MARCH 31, 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%               $ 152             7.17%
          2001                     40              9.11%                   7             7.54%
          2002                     36              8.78%                  --               --
          2003                     61              8.79%                  --               --
          2004                     31              8.02%                  16             8.71%
       Thereafter                 391              8.02%                 465             9.32%
                                -----              ----                -----             ----
         Total                  $ 599              8.29%               $ 640             8.77%
                                =====              ====                =====             ====

       Fair Value               $ 599                                  $ 640
                                =====                                  =====
</TABLE>



                                       21
<PAGE>   24



                           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.



                                       22
<PAGE>   25


                                   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:   May 8, 2001                               /s/   EDDIE R. HUMPHREY
                                                  ------------------------------
                                                        Eddie R. Humphrey
                                                  Acting Chief Financial Officer




                                       23