OPEC will miss Trump, its ‘companion’, and would be careful about strains under Biden.
Some OPEC members are worried that strains in the OPEC+ union could reappear with the administration of the newly elected US President, Joe Biden, as the outgoing President Donald Trump went from criticizing the ‘cartel’ to aiding and abetting, in order to achieve a record oil yield cut.
Biden could examine political relations with three members from OPEC – Saudi Arabia, Iran and Venezuela, just as with key non-OPEC member, Russia.
Severe US sanctions on Iran and Venezuela has kept large number of barrels of oil free, every day in the market, and if Biden loosens up measures on the sanctions in the nearest future, it will lead to increased supply in the market.
In some of his statements, Biden said he would lean towards multilateral discretion to the one-sided sanctions Trump has forced, even though that may not necessarily mean removing any sanctions any time soon. In his mission, Biden said he would revisit Iran’s 2015 atomic arrangement if the leaders keep their part of the bargain.
Trump quit the agreement in 2018, reemploying sanctions that cut Iran’s oil trades. Some in OPEC dread that the arrival of Iranian volumes will add to oversupply, without reductions somewhere else and stress over Moscow’s proceeds, with investment in OPEC+.
“Iran sanctions can be re-evaluated and then Iran will be back to the market, so again there would be oversupply and the current cut deal will be at risk,” an OPEC source said before the result of the political decision was known.
There are also fears Russia would leave OPEC+, as their ally leaves the White House. “There is the danger of Russia leaving the OPEC+ bargains too, which implies a breakdown of the arrangement, as it was Trump who welcomed Moscow,” the source said.
Diplomatic threat
Biden has named Russia as Washington’s most genuine worldwide danger. In his campaign, he additionally vowed to rethink relations with Saudi Arabia.
In contrast, Trump liaised with Saudi Arabia and Russia to end a fiasco that brought oil prices down. The outcome was a record global arrangement to cut oil to around 20 million bpd or around 20%. OPEC+ alone consented to cut 9.7 million bpd.
Trump connected more with the oil markets, regularly taking to Twitter to comment on supply and the American energy industry. Biden is viewed as bound to avoid meddling in OPEC matters as much as possible. He would depend more on advisers and not micromanage as Trump usually did.
“Biden would not have the comfortable relations with Putin that Trump seems to have,” said Chakib Khelil, a previous OPEC President.
Critical Implications
Trump built up a good relationship with top OPEC producer, Saudi Arabia’s ruler Mohammed Salman, who depends on the United States for weapons and security against territorial opponents.
Although, there were certain times Trump tried to bully OPEC+ into bringing prices down, as it was affecting gasoline prices in America; his continuous support for Shale oil also affected OPEC’s dominance in influencing and managing global oil supply. It is highly improbable that Joe Biden would make that type of interference.
Furthermore, it is highly unlikely that Iranian oil would get sanctions lifted quickly. Hence, this means OPEC+ individuals would have a sufficiently long time to change their arrangement to prepare for more Iranian oil.