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How a Biden presidency could result in elevated provide within the oil market

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An off-shore oil platform off the coast in Huntington Beach on Sunday, April 5, 2020.

Leonard Ortiz | MediaNews Group | Orange County Register | Getty Images

SINGAPORE — A Biden presidency may deliver 1 million barrels per day of Iranian oil again into the market, however result in decrease demand in the long term, an economist mentioned this week.

That’s as a result of Democratic presidential candidate Joe Biden is more likely to reestablish relations with Tehran if he’s elected, however introduce environmental insurance policies that restrict U.S. oil and fuel, mentioned David Fyfe of Argus Media.

“Arguably, a Biden presidency would move fairly rapidly toward some sort of rapprochement with Iran,” he informed CNBC’s “Capital Connection” on Friday.

“That of course could lead to maybe up to a million barrels a day of Iranian oil coming back onto the market,” he mentioned. “It might not happen immediately, but you could see that happening within the sort of first six months of a Biden presidency.”

By distinction, the Trump administration has put most stress on Iran, which has seen heavy financial sanctions imposed on the Islamic Republic, together with on its oil exports.

Biden has been main President Donald Trump in a number of polls, together with one by NBC News, which exhibits that he’s up greater than 10 share factors, 51.6% in comparison with 41%.

On the flip aspect, the Democrat’s insurance policies on local weather change may tighten the market over the long term.

“A Biden administration would try to get the U.S. back into the Paris Climate Accord,” Fyfe mentioned. “Therefore, over the longer term, it might actually be relatively bearish in terms of restraining hydrocarbon demand in the U.S. going forward.”

Biden final yr introduced a local weather plan that may see $1.7 trillion invested into clear power analysis and adjustments in infrastructure. He may additionally impose restrictions that may additional sluggish the expansion in U.S. shale oil and fuel manufacturing, mentioned Fyfe.

$50 to $55 oil by late 2021

Separately, he mentioned Argus Media’s base case state of affairs is for a “steady recovery” within the oil market, assuming Covid-19 circumstances don’t surge and result in widespread lockdowns.

Oil futures crashed when demand evaporated because the coronavirus disaster unfold earlier this yr and the market nervous about an oversupply. If the virus scenario does not escalate, the oil market ought to proceed to get well, Fyfe mentioned.

“Gradually, the 1.3 billion barrels of surplus oil that has accumulated in storage, that can be drawn down by the end of 2021, and that suggests that prices could recover to something closer to $50 to $55 by late 2021,” he mentioned.

“If we have a second spike in the virus and renewed shutdowns on a broad basis, then really, all bets are off and OPEC will be scrambling to try and stitch together a new deal on supply.”

OPEC in April agreed to chop 9.7 million barrels per day and steadily enhance manufacturing till April 30, 2022. 

Brent crude was down 0.62% at $43.07 a barrel throughout Asia’s late-afternoon buying and selling, whereas U.S. West Texas Intermediate crude futures have been down 0.68% at $40.91.

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