Oil’s ticking time bomb to detonate, analysts say

LUIS ROBAYO | AFP | Getty Images

An anti-government demonstrator stands next to a national flag during an opposition protest blocking the Francisco Fajardo highway in Caracas on May 27, 2017.

Crisis-stricken Venezuela has been thrust back into the energy spotlight, analysts told CNBC on Monday, with a further slide into political chaos likely to trigger wild swings in the oil price.

The oil-rich, but cash-poor, South American country is embroiled in a political meltdown. It comes after an opposition leader stood in the streets of Caracas last week and declared himself as the rightful president.

Growing unrest in Venezuela follows years of economic mismanagement, repression and corruption.

As a result, millions of people have been driven out of the country amid skyrocketing hyperinflation, power cuts and severe shortages of basic items — such as food and medicine.

“(Venezuela) provided little in the way of bullish impetus with markets having become accustomed to its long-running woes. Even so, recent events have provided a timely reminder of its wildcard status for the energy complex,” Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note published Monday.

“Oil’s ticking time bomb is sure to detonate at some point and the price reaction will be anything but muted,” he added.