President Biden’s energy policy is having “a positive effect” on oil prices and a “negative impact on the economy,” the Schork Group principal Stephen Schork argued on “Mornings with Maria” on Monday.
Schork pointed to Biden’s energy actions, including the cancelation of the Keystone XL oil pipeline project and temporarily suspending the issuance of oil and gas permits on federal lands and waters in a series of orders aimed at combating climate change.
President Biden revoked the permit for the 1,700-mile pipeline on his first day in office, ending a project that was expected to employ more than 11,000 Americans this year.
In remarks made by Biden in January before signing executive actions on tackling climate change, the president pointed to “a key plank” of his Build Back Better Recovery Plan, which he noted “is building a modern, resilient climate infrastructure and clean energy future that will create millions of good-paying union jobs.”
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“While this does not impact prices in the near term, it sends a clear message to the market that capital in this area will not be welcomed and will not be well treated,” Schork said on Monday.
“On the closer front of what we’ve seen the biggest impact that Biden has had on prices bullishly has been his treatment of Saudi Arabia,” he continued. “There was [a] surprise two weeks ago when Saudi Arabia took a more hawkish view at the OPEC meeting and oil prices surged after that surprise decision.”
Earlier this month, OPEC and the Russians shocked the market by not raising oil production at a time when oil markets are signaling, they need more supply as prices climb.
The market structure in oil is in what is known as “contango,” where nearby futures contracts trade at higher prices than crude in the future, suggest that the oil supply is tight and needs more supply.
Market watchers were expecting that the OPEC Plus would heed the market's call and raise output and restore as much as 1.5 million barrels of previous cuts to soothe rising oil prices and feed the oil-hungry global market. They also expected that Saudi Arabia, which just two months ago unilaterally cut production by another 1 million barrels of oil a day would start to give that back to the market.
Instead of raising production, the cartel left output unchanged with a few modest exceptions. Saudi Arabia extended its 1 million barrel-a-day cut. That caused a major price spike in driving prices to a two-year high as well as a surge in gasoline and diesel prices already compromised by the winter storm in Texas last month which affected refineries.
“There’s a lot of face slapping that this White House has done to the Saudi’s over the past month and that’s had an impact on price,” Schork noted on Monday, citing a few examples, including the fact that “they’re now freezing or threatening to freeze arm sales to both the UAE [United Arab Emirates] and Saudi Arabia.”
On Monday, West Texas Intermediate crude oil fell 76 cents to $64.85 per barrel and Brent crude futures for May were at $68.44, down 78 cents a barrel.
Still, Reuters reported, citing analysts, that a pact by top producers to rein in output and increased demand due to vaccine roll-outs will keep pushing prices upwards despite any temporary setbacks.
Schork explained on Monday that oil contracts are increasing because the economy is going to reopen leading to the global economy becoming stronger as well as traders pushing up contracts.
“We had a situation back In December where we had the forward curve of the market flipped,” Schork said.
“For the better part of 2020, prices in the spot markets, the current market were below that of the prices in the forward market,” he went on to explain. “This was a clear signal that there was a glut on the market and demand was not there to clear that glut.”
“We started to see that switch back in December where the spot prices started to move above the forward curve. So clearly this was a signal to take oil out of inventory to sate rising demand in the spot market,” Schork continued.
“This is a situation of demand is strong. It’s expected to get strong and traders are placing their bets accordingly.”
FOX Business’ Phil Flynn contributed to this report.