Following the recent news that the US Democratic Party candidate, Joe Biden, looks to have won the 2020 US Presidential Election after a tight race against Republican incumbent, Donald Trump;
Indrajit Sen, Oil & Gas Editor at MEED, part of GlobalData, offers their view:
“Joe Biden’s stated intention to lift sanctions on Iran could mar efforts by the Opec+ alliance to limit crude supply in a bid to sustain oil prices in the long term. Thusfar, the oil markets have adopted a wait-and-see approach to news of a new incumbent in the White House, with Brent crude holding steady at above $40/barrel after news of Joe Biden’s victory in the 2020 US Presidential elections on 7 November.
“Before the result was declared, however, the markets appeared to favor a second term for President Trump. After falling below $38/barrel at the end of October, crude oil prices spiked nearly 3% on 4 November after Trump prematurely claimed victory in the hotly contested US presidential race, with millions of votes still to be counted.
“The brief oil price spike on the back of a potential Trump electoral victory is indicative of the positive impact a second term in office for the incumbent would have had on global oil markets. By imposing stringent sanctions on Iran’s energy sector, and due to his support for the oil output curb cooperation between Saudi-led Opec and Russia-led non-Opec to boost prices, Trump is largely perceived to be an enabler of oil market stability.
“While Joe Biden has not outspokenly criticized the US oil and gas industry, his $2 trillion clean energy investment blueprint appears largely to sideline the upstream oil sector. Many in the oil industry say that they think that President-elect Biden will increase regulation of the oil sector, by limiting methane emissions, as well as limit or completely ban fracking on federal land.
“What is more worrying for the global oil markets – particularly for Saudi Arabia and Russia, which have been leading their respective groups into restraining crude production – is Biden’s intention to lift economic sanctions on Iran in a bid to make Tehran return to the negotiating table over its nuclear programme. A sanctions-free Iran could mean the country swiftly ramping up crude output in an effort to reclaim market share, hurting the interests of the wider Opec+ alliance and of the US as well.
“Under the Trump administration, the US became the world’s largest oil producer, surpassing both Saudi Arabia and Russia. US oil output peaked at 13.1 million barrels a day (b/d) this year, before declining to below ten million b/d for a period due to the impact of the pandemic on worldwide demand. In recent weeks, production has averaged 10.6 million b/d again, according to US government data.
“US self-sufficiency in oil also led the country to become a net exporter of the commodity, when including refined products such as diesel, jet fuel and gasoline.
“A strictly regulated US domestic oil industry, faced with the prospect of rising production and exports by Iran, could exert pressure on oil prices in the long term and prove detrimental for global oil markets.”