It’s important to remember that we’ve seen record production for both oil and gas in the US, more under a Democratic president than a Republican one. We have however, seen under the Biden-Harris administration, the ban on issuing licenses for future LNG exports, which adds a layer of uncertainty. If Trump is re-elected, the domestic industry would likely receive a short-term boost, but ultimately, it’s still guided by international oil prices. The industry is highly fragmented and competitive, with significant private-sector involvement. US relations with China, Russia, and Iran also come into play. Under Trump’s last Presidency, he reduced Iranian oil exports to about 500, 000 b/d. Under Biden, enforcement has been lax, with Iran putting more oil on the market. The same questions apply to Russia and potential sanctions on its oil and gas.
Is OPEC+ likely to proceed with adding supply in December as planned?
Most likely they will. However, bear in mind that OPEC+ is already overproducing beyond its quotas due to ongoing issues with “cheaters” like Iraq and Kazakhstan. Despite promises to compensate for this, we’ve yet to see those countries deliver. If OPEC+ moves forward with unwinding the voluntary production cuts, given the current demand scenario and non-OPEC+ supply, we should expect downward pressure on prices. That said, geopolitics can always change the equation, so there’s still a high degree of uncertainty in the markets.
Is OPEC+ unity at risk under this more challenging price environment?
The frequency of countries leaving OPEC+ has increased recently; the members do have divergent interests, but it hasn’t posed a significant threat to the organization as a whole. If the bigger players stick to their production decisions, it should continue to function. However, Iraqi overproduction is not something the group can afford to overlook; it’s the second-largest producer after Saudi Arabia. The challenge of compliance will be a persistent issue, and more so if market dynamics remain as they are today.