LONDON/DUBAI- Key members of OPEC are wary that strains in the OPEC+ alliance could reemerge with Joe Biden as US President, sources close to the organization said, and would miss President Donald Trump who went from criticizing the group to helping bring about a record oil output cut.
Biden could modify US diplomatic relations with three members of OPEC – de facto leader Saudi Arabia, and sanctioned countries Iran and Venezuela, as well as with key non-OPEC producer Russia.
Russia is the leader of oil producers allied with OPEC, a group known as OPEC+.
Strict enforcement of US sanctions on Iran and Venezuela has kept millions of barrels of oil per day off the market, and if Biden should relax measures on either in years to come an increase in production could make it harder for OPEC to balance supply with demand.
Biden has said he would prefer multilateral diplomacy to the unilateral sanctions Trump has imposed, although that may not mean a relaxation in sanctions any time soon. In his campaign, Biden said he’d return to Iran’s 2015 nuclear deal if Tehran resumes compliance with the pact.
Trump quit the pact in 2018, reimposing sanctions that cut Iran’s oil exports. Some in OPEC fear that a return of Iranian volumes will add to oversupply without cutbacks elsewhere and worry about Moscow’s continued participation in OPEC+.
“Iran sanctions can be re-evaluated and then Iran will be back to the market, so again there would be oversupply and the current cut deal will be at risk,” an OPEC source said before the election result was known.
“There is the risk of Russia leaving the OPEC+ deal too which means a collapse of the agreement, as it was Trump who brought Moscow on board,” the source said.
Biden has named Russia as Washington’s most serious global threat. During his campaign, he also pledged to reassess ties with Saudi Arabia.
Trump in April was involved in talks that led to a deal in which the Organization of the Petroleum Exporting Countries and Saudi Arabia worked with allied producers led by Russia to agree a record oil supply cut as the coronavirus outbreak hammered demand.
Trump stepped in to put political pressure on Saudi Arabia and Russia to end a dispute that had sparked a price war and resulted in both countries planning to raise output just as the pandemic led to restrictions on travel – and consequently in demand for fuel.
The result was an unprecedented global deal to cut oil supply by about 20 million barrels per 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 US energy industry as the election loomed.