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Oil prices shake off Venezuela bounce

Portrait of Nicolas Maduro
A portrait of Nicolás Maduro. Photo: Ruben Sevilla Brand/picture alliance via Getty Images

Oil prices fell on Wednesday as the fears of an escalation in Venezuela's political crisis faded, and U.S. inventories posted a surprise increase, adding to global supply. Crude prices have largely wiped out the politics-driven rally that began on April 22 after the U.S. decided to end sanctions waivers for countries importing Iranian oil.

What's happening: U.S.-backed Venezuelan opposition leader Juan Guaidó attempted to seize power from Nicolás Maduro on Tuesday, but has not been able to declare victory.

  • Whether or not the push to oust Maduro succeeds will "depend on the opposition’s ability to win over enough of the armed forces," writes Allison Fedirka, an analyst at Geopolitical Futures. "There are signs that members of the military are publicly supporting Guaidó, but it hasn't yet reached a critical mass."

The big picture: Fund managers have told Axios that they are starting to lose faith in the opposition's ability to topple Maduro alone, given an apparent increase of support from Russia, China and Cuba.

  • Oil traders look to be coming to the same conclusion.

What they're saying:

  • "We believe it will not be a quick fix to turn the state of the domestic oil industry around even with a new regime," commodity analysts at ING said in a note to clients.
  • "We simply don't know what is happening on the ground," Helima Croft, global head of commodity strategy at RBC Capital Markets told CNN. "I would be cautious about saying we are in the final chapter."

The bottom line: If Maduro goes, it will likely take years until Venezuela's oil production is operating at anywhere near its previous capacity (it is currently producing oil at a 70-year low). And it's looking less likely Maduro is going.

Go deeper: What's next for Venezuela's oil sector