Biden win could see oil glut over Iran deal

Energy analysts and speculators are eagerly awaiting the result on tonight's US election, with many predicting that a win for Democrat Joe Biden could lead to another oil glut in the market.

The forecast of a drop in oil prices relates to the belief that Biden would seek to strike a new nuclear deal with Iran, which has been hit hard by US sanctions under current President Donald Trump.

If the embargo on Iran is eased by Biden, then 2 million barrels of crude could eventually be released into the market daily.

While analysts have said this would not happen overnight, the market will likely see changes develop under a Biden administration - which analysts believe is the most likely outcome of the 3 November vote.

"If the US and Iran return on the path of diplomacy under a President Biden, there is a chance that the strict U.S. sanctions on Iran's oil exports could be eased, potentially paving the way for around 2 million barrels per day (bpd) of Iranian crude oil exports returning to the market," wrote oilprice.com on its Monday.

Biden has indicated that he would like to see a new agreement with Iran, that could lead to Tehran's nuclear ambitions being curtailed in return for sanctions relief.

Although it is unlikely to be a policy priority for Biden if elected, he would likely ease some sanctions on Iran as an incentive for new talks on its nuclear programme.

Iran might also wait until its own presidential elections in June before committing to new nuclear talks, according to oilprice.com, but would likely take advantage of any opportunity to export more oil.

Many are predicting that a Biden election win could scupper OPEC's current production cut arrangements with Russia, particularly if Iranian oil enters the market.

"Within a few months after a Biden election, we expect some Iranian oil will be coming to market," Iman Nasseri, managing director for the Middle East at consulting firm FGE told Bloomberg. "It's going to be a real headache for OPEC."

Energy experts have also suggested that Biden will likely allow domestic fracking to continue, a process that began under former Democrat President Barack Obama.

"We finally became energy independent. Every president since Nixon - nine presidents - have been calling for energy independence, and we finally achieved it and now we'll see what happens," Daniel Yergin, vice chairman of IHS Markit told CNBC.

Another said that Biden will look at oil production as creating jobs and wealth but energy policies will have a different focus under his administration.

"I think he will look at oil prices and oil diplomacy through the lens of the broader global economy, the US economy and US jobs," Helima Croft, RBC's head of global commodities strategy told the broadcaster.

"I think he'll look at it as an important economic input. Whereas, I think President Trump really thought of the industry as something of a strategic importance and it needed to be protected. I think for Biden, oil policy will remain important, but it will be part of a broader economic input."


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