Venezuela's Oil Return Is Bearish For Crude: Lance Roberts Warns 'Regime Change Rally' Might Be A Trap

Energy stocks are surging on news of regime change in Venezuela, but RIA Advisors’ chief market strategist, Lance Roberts, warns investors may be misreading the fundamental impact: more supply means lower prices.

The ‘Regime Change’ Trap

Following President Donald Trump's announcement of a U.S.-led intervention to topple the Nicolás Maduro regime and inject billions into Venezuela's energy sector, energy stocks and ETF tracking the sector, State Street Energy Select Sector SPDR ETF (NYSE:XLE) rallied by 3.66% to an intraday high of $47.32 on Monday.

Investors are betting on a reconstruction boom for U.S. oil majors like Chevron Corp. (NYSE:CVX). However, Roberts argues this optimism is “running ahead of oil fundamentals.”

While the opening of the world’s largest proven oil reserves—accounting for 303 billion barrels—is a geopolitical victory, Roberts points out the economic paradox: “That would potentially bring a lot more oil production online, which would suppress oil prices again.”

Bearish Fundamentals: $40 Over $80

Roberts contends that oil markets are governed by strict supply and demand mechanics. With global demand potentially slowing due to economic friction, adding Venezuelan supply creates a significant risk of a glut.

“I think oil prices have a bigger risk of going into the forties than the 80s over this year,” Roberts noted in a recent analysis.

He suggests that while energy stocks have historically correlated with WTI crude, they have recently detached, pricing in a speculative future that ignores the deflationary impact of new supply hitting the market in the next 12 to 18 months.

The Geopolitical Wildcard

Despite the bearish long-term outlook, Roberts acknowledges that crude is technically “oversold” in the short term. He warns that while Venezuela represents a long-term supply dampener, immediate tensions involving Iran could cause a temporary price spike.

With betting markets showing rising odds of a U.S. conflict with Iran following the Venezuela operation, a supply constriction in the Middle East remains the primary upside risk.

However, without that catalyst, Roberts warns of a harsh reality: energy stocks will eventually have to “catch down” to the reality of lower oil prices.

Consequently, Roberts is positioning his portfolio away from pure oil production and toward energy plays attached to AI power generation, avoiding the direct volatility of the crude cycle.

WTI Crude Hovers Around $56 A Barrel

Crude oil futures were trading higher in the early New York session by 0.36% to hover around $56.19 per barrel.

Here are some energy ETFs for investors to consider:

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo courtesy: Shutterstock