After Trump's loss, OPEC will miss a "friend" and be in anticipation of tensions under Biden
Sources close to OPEC said that key members of the organization fear renewed tensions within the OPEC + alliance under Joe Biden's presidency of the United States, and that they will miss President Donald Trump, who switched from criticizing the organization to helping it implement an unprecedented huge reduction in oil production.
Biden may decide changes in diplomatic relations with three major members of OPEC - Saudi Arabia, the organization's largest producer, and Iran and Venezuela that are subject to sanctions, as well as with Russia, the main non-OPEC producer. Russia is the largest oil producer among the countries allied with the organization, in what has become known as the OPEC + group.
According to Al Bayan newspaper, the strict application of US sanctions on Iran and Venezuela has withheld millions of barrels of oil from the market, and if Biden decides to ease measures on either country in the coming years, increasing production may make it more difficult to match supply with demand by OPEC.
For his part, Biden prefers multilateral diplomacy to unilateral sanctions imposed by Trump, but this may not mean that sanctions will be eased soon. During his campaign, Biden said he would return to the 2015 nuclear deal with Iran if Tehran recommitted to it.
Trump withdrew from the deal in 2018, reimposing sanctions that have curbed Iran's oil exports. Some in OPEC fear that the return of Iranian supplies will increase the supply glut unless it is matched by cuts elsewhere, and they have concerns about Moscow's continued participation in OPEC +.
In the same context, an OPEC source said before the election results became clear: "Iran's sanctions may be reassessed and then they will return to the market, and then the supply glut will return and the current reduction agreement will be in danger."
He continued, "There is also a risk that Russia will withdraw from the OPEC + agreement, which means the collapse of the agreement, as it was Trump who convinced Moscow to participate."
Global risk
Biden stresses that Russia is the source of the most dangerous global threat facing Washington. During his campaign, he pledged to reassess relations with Saudi Arabia.
Trump also participated, and in April, in talks that led to an agreement in which the Organization of the Petroleum Exporting Countries and Saudi Arabia cooperated with allied producers led by Russia to make an unprecedented massive reduction in oil supply in light of the outbreak of the Corona virus that hit demand.
Trump interfered and put political pressure on Saudi Arabia and Russia to end the conflict that sparked a price war that spawned plans for both countries to increase production while the pandemic was leading to restrictions on travel - and thus on fuel demand.
The result was an unprecedented global agreement to reduce the oil supply by about 20 million barrels per day, equivalent to about 20 percent. OPEC + alone has agreed to cut 9.7 million barrels per day.
For Trump, the drive was to raise global oil prices and prevent bankruptcies and hundreds of thousands of jobs lost in the US energy industry ahead of the election.
Trump is a longtime supporter of the oil and gas industry, and his administration has scrapped environmental regulations and rejected the prevailing scientific opinion regarding global warming from emissions.
Earlier in his presidency, Trump criticized OPEC's efforts to raise prices and urged members to pump more. An anti-OPEC bill known as "NOPEC" - it was first proposed years ago - was not passed despite gaining some momentum in his early presidency.
In a related context, a senior OPEC source from an ally member of the United States explained, "Trump has become our friend - after the historic shift in attitudes ... from NOPEC to the art of the deal," referring to the OPEC + agreement concluded in April and a famous book authored by Trump published in 1987.
Serious consequences
The OPEC + alliance has begun to support oil prices since 2017, and any developments threatening the future of the alliance may weaken the market, which will have dire consequences for OPEC, other producers, governments and dealers.
Trump has engaged in OPEC affairs more actively than any of his predecessors, as he has been tweeting to comment on production decisions and oil price movements, while Biden is expected to keep a distance from the organization.
"My opinion is that Biden will be more dependent on specialized advice from his advisers and will not resort to detailed management like Trump," said Chakib Khelil, Algeria's oil minister for ten years and former OPEC president.
"Biden will not have the warm relationship with Putin that appears to be for Trump," he added.
But despite Biden's statements about US-Saudi relations, it is unlikely to turn a completely new page. Gulf and diplomatic sources told Reuters that Biden's victory would not undermine decades-old alliances.
A source familiar with Iran's oil policy welcomed Biden's victory but doubted he would quickly lift sanctions. This would give OPEC + members ample time to adjust their agreement to clear the way for more Iranian oil.
"Even if the sanctions on Iran are lifted, it will take two to four months for Iran's oil exports to return to pre-sanctions levels for technical reasons ... Therefore, OPEC + has enough time to agree on a new production ceiling," he said.
