The U.S. and China are spiraling into an 'alarming' power play, says oil expert Dan Yergin

  • It is worrying that the U.S. and China remain locked in a wrestle for power, instead of working on engagement and collaboration, oil expert Dan Yergin told CNBC.
  • He was weighing in on a Reuters report that cited sources saying U.S. President Donald Trump is planning to add China's national offshore oil and gas producer, CNOOC, to a defense blacklist.
  • Yergin also predicted that oil demand will return to pre-Covid levels in 2022 or 2023.

The U.S. and China remain locked in a wrestle for power, and it's worrying that they're not working to engage and collaborate with each other, energy expert Dan Yergin told CNBC.

He was weighing in on a Reuters report that cited sources saying U.S. President Donald Trump is planning to add China's national offshore oil and gas producer, CNOOC, to a defense blacklist.

Yergin, who is the vice chairman of IHS Markit, said the move may be part of the notion of "decoupling," or a disengagement between the two countries.

"It's an alarming situation, we have a spiral going on now where instead of talking about engagement and collaboration and constructive relationship, it's great power competition, strategic rivalry, peer competitors," he told CNBC's "Street Signs Asia" on Tuesday.

"I think right now, the Trump administration is putting down a series of landmines almost, of difficulties for a Biden administration," he added.

Yergin said bringing stability to the U.S.-China relationship is the "biggest geopolitical issue" that President-elect Joe Biden will have to face.

"It will take both Beijing and Washington wanting to move in that direction, and I think it's become much more difficult over the last year or year and a half," he said, noting that other countries will be affected by U.S.-China tensions.

Oil demand outlook

Separately, Yergin discussed the outlook for the oil market as OPEC+ considers an extension to output curbs. OPEC+ is made up of members from the oil-producing group plus their non-OPEC allies.

"I think it's really a struggle right now between … the vaccine rally in prices and the coronavirus impact on demand," he said. "That's what's at the heart of the battle that's going on right now with OPEC and non-OPEC."

Brent crude was higher by 0.29% at $48.02 on Tuesday afternoon in Asia, while West Texas Intermediate was up 0.26% at $45.46.

He said oil prices are anticipating a recovery in demand and pointed to a pick up in U.S. demand before virus cases started to increase again.

"In fact, look at Chinese demand today. It's several hundred thousand barrels a day higher than it was this time last year, and we've seen the same in India," said Yergin.

"Even though work patterns will have changed, jet travel will change, I think we're going to see demand come back to what it was in 2019 sometime in 2022, 2023," he said.

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