The uncertainty of the US Presidential election decision dragged over the weekend with the democrats in a clear lead, but markets turned positive as a new President was eventually announced. The oil price regained strength despite the ongoing pandemic fallout and low oil demand. As we start a new week, Brent crude was back over US$40 a barrel with WTI holding above US$38 a barrel.
Many European countries are under lockdown for the second time and this will delay any hopes of a global turnaround in energy demand. Supply remains abundant as OPEC and friends prepare for their end of year meeting in a few weeks. The majority of analysts expect there will be a rollover in production figures with calls for ongoing tighter compliance. The CEO of Meyer Resources, Cornelia Meyer says, “the outlook is less than rosy with lockdowns in Europe and growing coronavirus cases in North America affecting demand.”
A change in power in the USA will not have an immediate impact on the country’s energy policy. A Democrat in the White House will still have to contend with a majority Republican senate, as well as more urgent issues like the ongoing pandemic, unemployment, a slow economy and deep political divide in the country. The Democratic focus will definitely have a greener approach in the years to come with climate change high on the agenda. The Paris Climate Agreement will no doubt be back in focus as will the question of pipeline construction and shale drilling in the oil producing states. President-Elect Biden has not been so vocal about opposition to US shale production as he realises the need for home produced oil at an affordable for the American consumer.
Analysts and geopolitical experts expect Joe Biden to revisit the Iranian sanction issue. The situation in Venezuela may take longer. President Trump continued to add sanctions on the Iranian regime, even in recent weeks as anti-sanction oil exports left the country. Iranian oil shipments that were on route to Venezuela were seized by American officials last week as were Iranian missiles said to be on the way to Yemen. This will not help the oversupply already on the market. In the event talks reopen with Iran, oil exports will take several months to return to the market. Its estimated that more than 3 million barrels a day are off the market due to sanctions.
One of the biggest energy gatherings in the world is being held virtually in the UAE this week, as leading energy CEOs and policy makers discuss the future of energy at ADIPEC. OPEC’s production decision will certainly be a topic of conversation, but leading oil producers and policy makers will be keenly speculating the possible shift in US energy policy and its impact on the global market.