Leumi's chief economist estimates that in the wake of Joe Biden's move, U.S. gas production is in jeopardy • "Freezing drilling and leasing gas fields is dangerous in the long run"
The gas drilling was stopped for 60 days.
Production field in California
Photography:
Islands.
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Following Biden's move - US gas production is in jeopardy and oil prices could climb, Leumi chief economist Dr. Gil Befman claims. Leumi economist refers to the new president's order to freeze US gas fields in public areas for 60 days "If the freeze remains, it could jeopardize US gas production," Befman explains.
"We note that the impact is expected to be long-term. The short-term impact is likely to be negligible, as energy producers prepared for Biden's entry into the U.S. presidency and more in the Trump administration have accumulated permits so they can drill in oil and natural gas fields over the next two years.
However, there may be a certain and gradual decrease in the natural gas production during this period, due to the obsolescence that will be in some of the natural gas wells, and which will reduce the natural gas production from the existing wells. "
As we have previously reported, Biden's ban could have dramatic consequences from an economic and geo-strategic point of view: more than 90% of US natural gas and oil reserves come from drilling. (Natural gas) and Saudi Arabia (oil).
Back in the Trump era, the U.S. Chamber of Commerce warned that a 2021 ban on drilling would lead to the loss of 19 million Americans and $ 7 trillion in GDP damage by 2025.
At the geo-strategic level, according to the US Chamber of Commerce's forecast, it will again have to rely on foreign countries, some of which are very unfriendly, such as Russia, and the Alliance of Petroleum Producers (OPEC), in which companies include Iran, Saudi Arabia and Venezuela. Algeria, Kuwait and Iraq.
According to data from the Global Carbon Project, in 2020 Trump's US led the world in reducing greenhouse gases, by 12% - even without Biden's current ban. The EU has reduced 11% of emissions and China only 1.7%.
According to Befman, Iran has begun to increase its oil production and it expects that over the next two months oil production will reach the level it was before US sanctions were imposed on it.
At the same time, however, the United States has issued an order to seize about 2 million barrels of oil it estimates belong to Iran to block Iranian energy exports, and two Iranian oil tankers have recently been seized by Indonesia. "Official data in China indicate that it has increased Imports of Iranian oil in December 2020 to a level almost double that of October and November 2020, following Biden's entry into the US presidency, Befman notes.
Befman also notes that the price of oil needed by Russia to maintain a budgetary balance by 2020 has risen to more than $ 80 a barrel, a seven-year high.
In addition, over the past year there has been a decline in Russia's oil production, and this is a combination of factors that has led Russia to need a higher oil price than what currently exists in the markets.
Looking ahead to the oil market, Befman predicts that voluntary cuts in Saudi Arabia's oil production are expected to increase the oil market deficit in the first quarter of the year and even reduce global oil inventories.
"If the immunization process from the corona turns out to be effective and safe, with the approval of vaccines from other manufacturers, with efficacy against various mutations of the virus, it will create additional support at a price level higher than $ 55 per barrel (more than the current level)," says Befman.
"It seems that the market is already pricing in a very large future deficit that may arise in the market. The progress towards global marketing of a variety of vaccines, which can be easily transported and brought to developing countries at a low price, is an important signal of potential increase in demand for crude oil later, which is already optimistic. Very much in the 'consensus' are oil prices. "
