Change in Washington to destabilize oil prices

Oil&Gas Materials 9 November 2020 11:06 (UTC +04:00)
Change in Washington to destabilize oil prices

BAKU, Azerbaijan, Nov.9

By Leman Zeynalova – Trend:

The change in Washington will be a possible destabilizing factor for oil prices, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and Global Head Strategy Risk at Berry Commodities told Trend.

“Possible rapprochement between Biden/US and Iran could bring some additional Iranian volumes on the market, putting prices on hold or downwards. At the same time, instability in US is increased, so also there is possible negative impact on oil prices.

On the other hand, one could argue that a possible Biden strategy to quell shale oil and gas, and not releasing additional permits for drilling elsewhere, also offshore, will put a major damper on US oil production, pushing prices maybe up.

Instability will still be in market, so looking at oil glut in place, demand down and even heading for new crisis, prices will be down.

Biden still needs to have his administration in place, so until that is clear, politics and instability will be playing, most probably pushing prices down,” said the expert.

According to Ed Crooks, Wood Mackenzie Vice-Chair – Americas, five consequences of a Biden administration for US energy are:

1) A boost for offshore wind. The Trump administration has slowed the process of approving offshore wind and proposed to close off a section of the US Atlantic coast from Florida to Virginia. A Biden administration will act faster to support states and companies seeking to develop offshore wind industries.

2) Restrictions on oil and gas development. There will not be a ban on fracking, but Biden has pledged to end sales of new leases for oil and gas development on public lands and waters. Onshore, the impact would be minimal. Offshore, the effects would be more significant, although they would take some time to become apparent. A ban on new leasing, if permanent, would mean that by 2035 US offshore oil and gas production would be about 30% lower than if lease sales had continued.

3) New hurdles for oil and gas infrastructure projects. Decisions on federal permits for infrastructure projects will take into account their implications for greenhouse gas emissions and climate change, creating new hurdles for developers of oil and gas pipelines and export facilities.

4) Support for electric vehicles. Biden plans to impose tighter fuel economy standards, which will help sales of electric cars. By 2030 there could be 4 million EVs on US roads as a result of those standards, almost 60% more than if the Trump administration’s rules had taken effect. However, the impact on US fuel demand this decade will be minimal. Even 4 million EVs represent only about 1.5% of the total of 275 million vehicles we expect on US roads in 2030.

5) No quick relaxation of sanctions on Iran. Although Biden has been strongly critical of Trump’s decision to take the US out of the international deal over Iran’s nuclear programme, and has promised a change in approach, that does not mean he will move quickly to relax the sanctions that have been imposed since 2018. Negotiations about a possible renewed deal are not likely to begin until June 2021 at the earliest, after Iran’s elections, and there is no guarantee that the two countries will reach agreement.


Follow the author on Twitter: @Lyaman_Zeyn