Venezuela’s oil production fell to a new low last month, as economic crisis and sanctions continue to strangle the industry.

Venezuela’s output fell by 35,000 bpd in May, plunging to 741,000 bpd for the month, according to OPEC’s secondary sources, the lowest total in about a half century. The problems for Venezuela are not new and are very big, and as the country settles into a political stalemate that shows no signs of changing, the country’s oil production may simply continue to erode.

Proponents of regime change had hoped that with President Nicolas Maduro out of the way, the incoming Juan Guaidó would lead to an overhaul of the country’s oil sector. Guaidó even laid out plans earlier this year that consisted of a partial privatization of the energy sector, hoping to attract foreign companies into the country. It would amount to a dramatic change for Venezuela, an erasure of the Chavez era in many ways, where state-owned PDVSA has presided over the oil industry for years.

Venezuela has massive oil reserves, the largest in the world, but conventional fields are in decline and heavy oil fields require huge investment. Infrastructure is crippled, PDVSA is hollowed out both financially and in terms of its human capital. There is little hope of a turnaround.

The failed coup in late April, a mission that turned out to be slapdash and poorly prepared, left Guaidó’s American sponsors disillusioned. The Trump administration reportedly received assurances that top elements of the Venezuelan military were prepared to go along with the coup, but as the operation went into effect, almost no one from the military or security forces actually flipped. Related: Oil Spikes On Soaring U.S., Iran Tensions

President Trump believes that his national security adviser John Bolton “got played,” according to new report from the Washington Post. He thinks Bolton was outfoxed by both the opposition and by Maduro. Trump apparently “chewed out” his staff after the coup turned out to be a flop. The Washington Post said that Trump is “losing both patience and interest in Venezuela.” He seems to have given up and moved on to other issues.

Trump also had a conversation with Russian President Vladimir Putin in May, which apparently assuaged his concerns about Russian involvement. “I had a very good talk with President Putin — probably over an hour,” Trump said in early May. “And we talked about many things. Venezuela was one of the topics. And he is not looking at all to get involved in Venezuela, other than he’d like to see something positive happen for Venezuela.”

Russia is stepping into the void in Venezuela as the Trump administration turns its sights on Iran. Rosneft is “extracting concessions from crisis-ridden Venezuela to enter the offshore natural gas market on the cheap,” Bloomberg reported. Rosneft will receive tax breaks to produce and export gas from some offshore fields. With few other suitors, Venezuela is rolling out the red carpet.

“China is backing away in terms of its financial exposure,” Andrew Stanley, an associate fellow at the Center for Strategic and International Studies, told Bloomberg. “Whereas the Russians, over the past few years, they’ve gone in the opposite direction, they’ve kind of doubled down and seen this as an opportunistic plan.” Related: Is This The Beginning Of The End For Tesla’s Solar Business?

At the same time, Chevron is facing the possibility of being forced to exit. Chevron has received waivers from the U.S. Treasury Department on sanctions, allowing it to continue to operate in the country. Chevron’s operations were viewed as critical to keeping the Venezuelan oil industry alive so that something could be handed off intact to the incoming Guaidó administration. As those plans have run aground, the next steps are unclear.

Unless Chevron receives a waiver extension after its expiration on July 27, Chevron might be forced out. “If Chevron leaves, the country will almost certainly nationalize its oil assets,” said Muhammed Ghulam, an energy analyst at Raymond James, according to CNN. “Maduro is in a fight for his country. He needs all the cash and resources he can get.” Chevron could obviously still receive an extension in the next few weeks, but with Trump giving up on Venezuela, the oil major’s geopolitical importance in Venezuela is vastly diminished.

In any event, the waning interest from Washington is bad news for Guaidó, who may be left out in the cold. It’s also bad news for Venezuela’s oil sector, which will continue to fall apart amid an historic economic, financial and political crisis, as well as from asphyxiation due to U.S. sanctions.

Meanwhile, Venezuela’s refugee crisis continues to grow worse. The political stalemate almost guarantees there is little hope of a resolution anytime soon.

By Nick Cunningham of Oilprice.com

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