With the official inauguration of Joseph Biden as head of the United States, a number of procedures have been launched in terms of revising the national energy policy implementation strategy. The very first hours of his presidency have seen the new American leader make a number of landmark decisions for the country's fuel and energy complex.
In particular, the Biden administration has temporarily stopped issuance of new permits for drilling and for leasing federal territories, which cannot but cause dissatisfaction with the country's oil and gas complex. In compliance with the January 21 decree signed by acting US Secretary of the Interior Scott de la Vega, the "freeze" will last 60 days and is needed to review the latest decisions made. On January 20, his first day in the White House, Biden ordered to pass a temporary moratorium on the operation of his predecessor Donald Trump's relevant decree. The day before, the Republican gave consent to an agreement on leasing 160 thousand hectares of land in Alaska's Arctic National Wildlife Refuge to energy companies for oil and gas production.
Biden also signed a decree to stop the construction of the Keystone XL oil pipeline at the border with Canada. A step to this effect was taken despite the project's full-throated support by the neighboring country's authorities. Canadian Prime Minister Justin Trudeau was hopeful for attention to Ottawa's "acclamatory" stance as regards laying the oil pipeline. Moreover, the banned resolution on Keystone XL may raise the demand for Russian Urals oil in the United States, which can easily replace the deficit from other partially or completely "departing" oil suppliers (Canada, Venezuela) so as to later mix it with its own light grades.
Besides, a Biden decree brought the United States back to the Paris Climate Agreement.
Biden seems to have kicked off a process to conceptually shift the traditional energy approach. But that's a far cry from saying that the national shale industry is inevitably going to collapse. And still, some of the potential financial interventions that stimulate shale production may be diverted to the segment of renewable energy sources (RES). So, Biden's "green deal" is becoming a reality.
As regards the strategic vision, Biden is an obvious enemy of oil, as compared to his predecessor Donald Trump, who associated the US future mainly with traditional energy, without preferring trendy renewables, whose safety and low carbon content are once in a while sketchy.
The United States' foreign policy is also expected to change and affect the world hydrocarbon market. Biden, as is commonly known, may restart the "nuclear deal" with Tehran, with the sanctions relief to provoke the influx of new considerable volumes of Iranian oil to the global market. And this will pose an already significant risk of overstocking the niche at a moderate recovery rate of the pre-crisis demand level, which the International Energy Agency (IEA) forecasts for 2021. (The organization's January review reads that global oil demand will recover by 5.5 million barrels per day, up to 96.6 million barrels per day in 2021, after an unprecedented 8.8-million-barrel fall in 2020. In the previous forecast, the demand was expected at a daily 5.78 million barrels).
Hence, Biden is a headache for active OPEC+ participants: this year, if sanctions against Iran are lifted, specifications of the production-limiting agreement will have to be revised. Iran is known to be spared OPEC quotas over the virtually permanent sanctions "infringement".
In the meantime, the world oil market situation remains fairly stable: price quotations for Brent oil are above $55 per barrel. And still, chances are slim that the $60 milestone will be passed any time soon. The large-scale vaccination narrative seems to give cause for cautious optimism. However, up-to-date information on a several-fold increase of COVID-19 cases in China is a particularly meaningful negative signal to the stock exchanges.
However, China maintains a high level of consumption so far. The rapid progress of the Chinese economy in the fourth quarter proved higher than experts expected. In October-December 2020, China's GDP growth was 6.5%, having brought the annual GDP growth to 2.3%. And still, this was China's worst performance since 1976.
OPEC+ keeps monitoring the developments and does not yet plan a full-fledged intervention. The next OPEC+ meeting is due on March 4, with sessions of the alliance's Monitoring Committee scheduled for February 3 and March 3.