Will USA Election Outcome Affect OPEC+ Policy?

by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas

There is little doubt that, while the outcome of the U.S. elections could dramatically impact U.S. relations with individual members of OPEC, OPEC+ decisions are likely to be largely independent of those bilateral relationships. 

That’s what Ed Morse, a Senior Adviser at Hartree Partners, and previously the Global Head of Commodity Research at Citi Group, told Rigzone when asked if the U.S. election outcome will affect OPEC+ policy.

“When it comes to OPEC+ policy, national interests across critical OPEC+ countries focus the attention of the group on oil price levels and direction of change,” Morse said.

“Given the relationship between global oil inventories and prices, OPEC+ concerns weigh heavily this year,” he added.

Morse told Rigzone that there is a general agreement that demand growth is slowing down and that non-OPEC+ countries are likely to oversupply demand needs by between 500,000 barrels per day and one million barrels per day, “even without a return to markets of voluntary cuts made by a handful of OPEC+ countries”. 

“These voluntary cuts amount to 2.2 million barrels per day and if OPEC decides to add oil pro rata across 12 months, it would take only a few months before visible inventory growth would bring prices lower, perhaps to the low $60 range for Brent,” he warned.

Morse said there is also concern about the commitment made to the UAE to increase its targeted production by 300,000 barrels per day over 12 months.

“The group has been massively successful in pushing the world to draw down inventories,” Morse told Rigzone.  

“That’s why current uncertainties in the market in the short run would likely mean that the wisest policies for the group would push toward kicking the can down the road on a decision to add barrels to the market,” he added.

Morse said an escalation of the Israel-Iran conflict could lead to market disruptions that could push the group to reduce a portion of the voluntary cuts. He added, however, that “the larger producers are acutely aware of the difficulty of pulling back some of the oil added into the markets and would prefer, at least for a while, to defer any decision on any reduction in the cuts”.

“At the end of the day, this focus of OPEC+ on inventories and recent history indicate that decisions on production levels would likely only marginally be impacted by the results of the U.S. election,” he went on to state.

When asked if the election outcome will affect OPEC+ policy, Diana Furchtgott-Roth – Director, Center for Energy, Climate, and Environment, and The Herbert and Joyce Morgan Fellow in Energy and Environmental Policy, at the Heritage Foundation, told Rigzone, “it’s common sense that a policy of “drill baby drill” poses different challenges to OPEC than a policy of transitioning to net zero”.

“If Donald Trump wins a second term, OPEC would have to learn to live with a scenario where it would be easier for American upstream producers to get leases and for downstream producers to get pipelines and export infrastructure,” Furchtgott-Roth said.

“Geopolitics is complicated, but one thing is certain – more U.S. oil and gas would be sloshing around world markets and Donald Trump would have many opportunities to make deals,” Furchtgott-Roth added.

Offering his opinion, Benjamin Zycher, a Senior Fellow at the American Enterprise Institute (AEI), told Rigzone that OPEC+ output will grow over the next four years regardless of who wins the presidency.

“Harris will constrain U.S. energy output directly,” he said. 

“Trump’s protectionism will increase U.S. producers’ input costs significantly, and will yield a dollar artificially strong, thus reducing international demand for U.S. crude oil and LNG,” he added.

Rigzone has asked the Trump and Harris campaigns, and OPEC, for comment on Morse, Furchtgott-Roth, and Zycher’s statements. At the time of writing, none have responded to Rigzone’s request yet.

The U.S. election is scheduled to be held on November 5. Trump served as U.S. President from January 20, 2017, to January 20, 2021. Joe Biden has served as U.S. President since January 20, 2021.

The next OPEC and non-OPEC ministerial meeting and the next Joint Ministerial Monitoring Committee meeting are both scheduled to be held on December 1, according to OPEC’s website .

by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas