The US presidential election, which will be held in November this year (November 13), can bring major changes in the commodity market, including oil.
Donald Trump’s opponent from the Democratic Party, Joe Biden, has promised to invest $ 2 trillion in green energy if he wins, and will not issue a new permit to drill on state-owned drilling using the modern hydraulic fracture method used in shale fields. This type of drilling has been protested by environmentalists because it requires the pumping of water, sand and some chemicals to release oil and gas. However, industry activists in the United States have claimed that Biden’s move could kill thousands of jobs in the industry.
In addition, Peltz said it expects US oil production to fall by 880,000 barrels per day by the end of this year and another 1 million barrels by the end of 2021. By then, US total production by that time would be 3.1 million barrels per day less than the pre-Corona Plateau estimate. According to Rapidan Energy, in the international arena, Biden’s victory could reduce Iran’s embargo by bringing back 1.8 million barrels of Iranian exports to the market, and Venezuela could potentially send 500,000 barrels of oil to the world market.
Given Pletz’s expectation that Biden’s environmental policies will not be prioritized, at least in the first year of his presidency, and the return of Iranian and Venezuelan oil barrels to a market facing oversupply, this scenario could further hurt oil prices.
*** Trump-Biden oil dual
The November 13 election in the United States could make a big difference for the next four years in terms of the country’s oil policies, which affect the supply and demand structure of this market, both at home and abroad. On the one hand, there is a government that has been supporting fossil fuels for the past four years, bringing its oil production to a record 12 million and turning the United States into a net exporter for a while.
However, with the advent of the corona and the decline of shale production, the title was taken from the United States. Biden, on the other hand, wants to invest heavily in green fuel with former Vice President Barack Obama.
In the first part of a series of reports, Pletz covers the effects of this election on oil. According to the report, the promise of the Democratic candidate to stop issuing drilling permits in federal lands and waters will have the greatest impact on the domestic market, because US production by 2025 with this scenario could be reduced to 2 million barrels per day. Find. According to Pellets, the decline in production will occur mainly in the Delaware Reservoir in New Mexico, as well as in the Gulf of Mexico fields.
*** Biden’s approach to Iran and Venezuela
But internationally, Biden’s approach to Iran and Venezuela, which are struggling to cut a total of 3 million barrels due to the Trump administration’s sanctions, will have the biggest impact on the oil market and, according to some analysts, threaten oil prices. Was. Other potential implications will be Biden’s election as the next president in the field of environment, foreign relations and trade policy.
While some oil executives have warned of a dark period with Biden’s victory, Pelts analysts do not expect his anti-fossil record to be high on his potential administration’s initial agenda. “I do not believe for a moment that he (Biden)’s first year in government will be accompanied by action in the oil and gas sector at a time when the sector is struggling to recover,” said Chris Migley, global director of the Pellets think tank.
“It will be a suicide,” he added. “He needs to make sure the economy is strong and stable.” That is why Migli sees Biden’s election as a negative signal for the oil market, because in his opinion, with this event, there is a high probability that the export oil of the countries under sanctions will be released. Therefore, despite the continued struggle of shale oil with the current economy, this may not be his first priority.
*** The future of shale
US production has been reopening production facilities to 2.8 million barrels per day in recent weeks, but a sharp drop in investment is expected to lead to a drop in production by the end of next year. Pellets Analytics predicts that the country’s production will fall by about 880,000 barrels this year and 1 million barrels next year. Accordingly, the country’s production by the end of 2021 will be 3.1 million barrels less than the Pletts forecast before prices fell. US oil production has increased by 3.9 million barrels per day since Trump entered the White House in 2017. But the March corona epidemic called into question the success of the government.
Despite the prevailing belief that the Trump administration played a key role in boosting production, Peltz said the end of the Obama administration’s 2015 oil embargo played a bigger role. During his second term, Trump has vowed to ease production restrictions, lift some methane regulations and open up some offshore areas for drilling.
*** Lifting sanctions
According to the report, the approach of the future US president could have the greatest impact on global supply, as 2 million barrels per day of Iranian oil exports may return to the market, either through Biden’s return to the nuclear deal or direct talks with Trump.
“Saudi Arabia and Russia are unlikely to return one to two million barrels of oil production with a sharp drop in production,” Pletz said.
Iranian oil to make room; “An issue that could accelerate the turn of the next turn to a strategy of increasing market share.”
Rapidan Energy predicts that Iran’s oil exports will increase by 1.8 million barrels per day by the end of 2021 if Biden wins, a year earlier than that in the scenario of Trump’s election and renegotiation. Of course, Iran has so far rejected the talks under the pressure of sanctions. In the case of Venezuela, too, Biden, as president, appears to be easing sanctions with so-called humanitarian goals. Trump, meanwhile, prefers to meet and negotiate directly with Venezuelan President Nicolas Maduro.
Any easing of restrictions on the State Oil Company (PDVSA) would have less of an effect than the lifting of US sanctions on Iran.
According to Platts, Venezuela’s exports could potentially increase by half a million barrels to reach 2019 levels, but the country’s oil industry will continue to face problems such as high debt and a lack of foreign investment.
In the area of oil diplomacy, too, Trump is likely to continue to tweet. But under Biden, any US diplomacy with OPEC members may be behind the scenes. Anti-OPEC laws will only be strengthened if retail gasoline prices in the country rise, which is not expected until the end of 2021.
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