BAKU, Azerbaijan, Nov.9
By Leman Zeynalova – Trend:
Despite clear policy differences between the incumbent President and the challenger, US oil production will decline YoY in 2021 under any administration, Trend reports with reference to JP Morgan Bank.
“Although energy policy is under the control of the White House per se, we expect a more watered-down stance on production in 2021 that might have been professed during the election campaign, given the still weak economy and the battered state of the US oil industry. Year-to-date, 65 oil and gas companies have filed for bankruptcy and 107,000 direct jobs have been lost between March and August due to the oil price collapse and coronavirus pandemic (according to PricewaterhouseCoopers, the industry supports 9.8 million jobs of total US employment). We believe that it is unlikely that a Democratic administration would completely ban fracking or new exploration on federal lands and waters, although it is likely to clawback leasing near national parks and Native American lands. This should help to balance the demands of the more environmentally-focused groups in the Democratic Party and that of the moderate and independent voters in hydrocarbon-rich swing states like Texas and Pennsylvania in the near term.
“A more immediate impact on supply from a change in administration might come if the US rejoins the JCPOA resulting in a likely return of Iranian barrels into the market. Given the former VP’s role in the 2015 JCPOA agreement, a path to easing sanctions on Iran is possible. However, it is unlikely that any negotiations can restart before Iran’s presidential election in June 2021. But a path to a constructive dialogue will be difficult. A Biden administration would likely seek an interim deal similar to the 2013 JCPOA, which could involve some nuclear concessions in exchange for modest sanctions relief. This raises the probability that 500 kbd of oil in Iranian floating storage could make it into the market by 3Q21 at the absolute earliest. The return of the full 2.2 mbd of Iranian production would likely take much longer. Again, we believe at the earliest it is a 2022 story, as it took Iran about six months to comply with the JCPOA the first time (though now that Iran has less to dismantle, it could be likely accomplished in a shorter timeframe). However, the prospect of four more years of blanket “maximum pressure" sanctions under a second Trump term in the White House might also force Tehran to enter negotiations, thus raising the odds of a deal with the Trump administration too,” reads the data released by the Bank.
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