Biden has said he would prefer multilateral diplomacy to unilateral sanctions (Archive)
Key members of OPEC fear that tensions in the OPEC + alliance could resurface with Joe Biden as US president, sources close to the organization said, and would miss President Donald Trump, who went from criticizing the group to helping achieve a record cut in oil production.
Biden could modify the United States’ diplomatic relations with three OPEC members: the de facto leader Saudi Arabia, and the sanctioned countries Iran and Venezuela, as well as with Russia, a key non-OPEC producer.
Russia is the leader of OPEC’s allied oil producers, a group known as OPEC +. The strict enforcement of U.S. sanctions on Iran and Venezuela has kept millions of barrels of oil a day off the market, and if Biden were to relax measures in the coming years, an increase in production could make it harder for OPEC to balance supply. with demand.
Biden has said that he would prefer multilateral diplomacy to the unilateral sanctions Trump has imposed, although that may not mean a relaxation of sanctions anytime soon.
In his campaign, Biden said he would revert to the 2015 Iran nuclear deal if Tehran resumes compliance with the pact. Trump abandoned the pact in 2018 and reimposed sanctions that cut Iran’s oil exports.
Some in OPEC fear that a return in Iranian volumes will add to excess supply with no cuts elsewhere and worry about Moscow’s continued participation in OPEC +.
“The sanctions on Iran can be reassessed and then Iran will go back to the market, so again there would be an excess supply and the current cut-off agreement will be at risk,” said an OPEC source before the outcome of the talks was known. elections.
“There is a risk that Russia will also abandon the OPEC + agreement, which means a collapse of the agreement, as it was Trump who brought Moscow on board,” the source said.
Biden has named Russia as Washington’s gravest global threat.
During his campaign, he also vowed to reevaluate ties with Saudi Arabia. In April, Trump participated in talks that led to a deal in which the Organization of the Petroleum Exporting Countries and Saudi Arabia worked with allied Russian-led producers to agree to a record cut in oil supply as the coronavirus outbreak hit the US. demand. Trump stepped in to put political pressure on Saudi Arabia and Russia to end a dispute that had sparked a price war and resulted in both countries planning to increase production just as the pandemic triggered restrictions on travel and consequently on demand for fuel.
The result was an unprecedented global agreement to reduce oil supplies by about 20 million barrels per day, or about 20 percent.
Only OPEC + agreed to cut 9.7 million bpd. For Trump, the motivation was to raise world oil prices and avoid bankruptcies and the loss of hundreds of thousands of jobs in the American energy industry as the elections approached.
Trump has been an advocate for the oil and gas industry, rolling back environmental regulations and rejecting mainstream science about how emissions are causing global warming. Early in his presidency, he had criticized OPEC for seeking higher prices and urged members to pump more.
America’s anti-OPEC legislation known as NOPEC, first introduced years ago, did not become law despite having gained some momentum earlier in his presidency. “Trump is now our friend, after the historic U-turn,” said a senior OPEC source of an OPEC member ally of the United States, who did not want to be named.
“From NOPEC to the art of the deal,” he added, in a reference to the April OPEC + pact and a 1987 book by Trump.
Trump developed a close relationship with the de facto ruler of Saudi Arabia, OPEC’s top producer Mohammed bin Salman, or “MbS,” which relies on the United States for weapons and protection against regional rivals like Iran.
The OPEC + alliance has been propping up oil prices since 2017 and any developments that threaten the future of the alliance could weaken the market, with significant implications for OPEC and other producers, governments and traders. Trump became more actively involved with OPEC than his predecessors, often taking to Twitter to comment on production decisions and oil price movements.
Biden is considered more likely to keep the cartel at arm’s length. “My view is that Biden would rely more on the professional advice of his advisers and would not micromanage like Trump does today,” said Chakib Khelil, Algeria’s oil minister for a decade and a former OPEC president.
“Biden would not have the cozy relationship with Putin that Trump seems to have,” Khelil added. Yet despite Biden’s campaign comments on the US-Saudi relationship, a radical reboot is considered unlikely.
Regional Gulf sources and diplomats have told Reuters that a Biden victory would not disrupt decades-long alliances, and a source familiar with Iranian oil thinking welcomed Biden’s victory but said he doubted sanctions would be lifted quickly.
This would give OPEC + members enough time to adjust their deal and make room for more Iranian oil. “Even if Iran’s sanctions are lifted, it will take two to four months for Iran’s oil exports to return to pre-sanction levels due to technical problems, “he said
.
