Sources close to the organization said that key members of OPEC fear that tensions in the OPEC + alliance with Joe Biden as US President could re-emerge, and that President Donald Trump would miss the criticism of the group passed a record cut in oil production.
Biden could change US diplomatic relations with three members of OPEC – the de facto leader Saudi Arabia and the sanctioned countries Iran and Venezuela, as well as the main non-OPEC producer Russia.
Russia is a leader in oil producers allied with OPEC, a group called OPEC +. The strict enforcement of US sanctions against Iran and Venezuela has kept millions of barrels of oil per day out of the market. Should Biden relax measures in the coming years, an increase in production could make it difficult for OPEC to balance supply and demand.
Biden has said he would prefer multilateral diplomacy to the unilateral sanctions Trump imposed, although that may not mean an early easing of sanctions.
In his campaign, Biden said he would revert to the 2015 Iranian nuclear deal if Tehran resumes compliance with the pact. Trump terminated the pact in 2018 and re-imposed sanctions that restricted Iranian oil exports.
Some in OPEC fear a return in Iranian volume will lead to oversupply with no cuts elsewhere, and worry about Moscow’s continued participation in OPEC +.
“Iran’s sanctions can be reassessed and then Iran will come back on the market. So there would be an oversupply again and the current austerity treaty would be jeopardized,” an OPEC source said before the election result became known.
“There is a risk that Russia will leave the OPEC + deal as well, which will mean a collapse of the deal, as it was Trump who got Moscow on board,” the source said.
Biden has identified Russia as Washington’s greatest global threat.
During his campaign, he also promised to reassess relations with Saudi Arabia. Trump was involved in talks in April that resulted in an agreement in which the Organization of Petroleum Exporting Countries and Saudi Arabia worked with Russian-led allied producers to agree a record cut in oil supplies as the coronavirus outbreak weighed on demand. Trump stepped in to put political pressure on Saudi Arabia and Russia to end a dispute that had sparked a price war and led both countries to plan to increase production, just as the pandemic led to travel restrictions – and hence demand for fuel.
The result was an unprecedented global deal to reduce oil supplies by about 20 million barrels a day, or around 20 percent.
OPEC + alone agreed to cut 9.7 million bpd. For Trump, the motivation was to raise global oil prices and prevent bankruptcies and hundreds of thousands of job losses in the U.S. power industry as the elections loomed.
Trump was a proponent of the oil and gas industry who pulled back environmental regulations and disapproved of the popular science about how emissions cause global warming. At the beginning of his presidency, he criticized OPEC for targeting higher prices and urged members to pump more.
Anti-OPEC US legislation known as NOPEC – first introduced years ago – did not become law, although it had gained some momentum earlier in his presidency. “Trump is our friend now – after the historic U-turn,” said a senior OPEC source for a US OPEC ally, declining to be named.
“From NOPEC to 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 Mohammed bin Salman (“MbS”) of Saudi Arabia’s leading OPEC producer, who relies on the United States for arms and protection against regional rivals such as Iran.
The OPEC + alliance has been supporting oil prices since 2017, and any developments that threaten the future of the alliance could weaken the market, which could have a significant impact on OPEC and other producers, governments and traders. Trump was more actively involved with OPEC than his predecessors and often went to Twitter to comment on production decisions and oil price movements.
It is believed that Biden tends to keep the cartel at bay. “I believe that Biden would rely more on professional advice from his advisors rather than micromanaging Trump today,” said Chakib Khelil, Algeria’s oil minister for a decade and former OPEC president.
“Biden would not have the cozy relationship with Putin that Trump seems to have,” added Khelil. Despite Biden’s campaign comments on the US-Saudi Arabia relationship, a radical reset is seen as unlikely.
Regional sources and Gulf diplomats have told Reuters that a Biden win would not turn decades of alliances on their head. A source familiar with Iranian oil thinking hailed Biden’s victory but doubted the sanctions would be lifted quickly
This would give OPEC + members long enough time to adjust their deal to make way for more Iranian oil. “Even if Iran’s sanctions are lifted, it will take two to four months for Iranian oil exports to return to pre-sanctions levels due to technical problems.” ” he said