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OPEC, Russian sanctions and Iran: What could Trump do to oil?

Knee-jerk reactions are dangerous things. The pummelling for risk-on asset classes generally and equities in particular that we saw post-Brexit serve as a timely reminder and potential template for a Trump White House.

But what does this mean for the commodity markets and oil in particular?

If the dollar is selling off -- and at the time of writing it is selling off -- then the inverse relationship with commodities would very often mean a bid under the price of Brent, WTI et al.

However, an overriding factor is obviously the global uncertainty that a Trump victory would create for policymakers everywhere. And OPEC is the world's biggest oil market policymaker.

For OPEC to try and reign in production was always going to be a tough task but could a Trump victory make the task more difficult?

You betcha!

Think about it. Oil is currently selling off. At this moment, WTI is now below its 200-day moving average at $43.37. The positivity in the price surrounding the framework for an oil production cut from Algiers has already evaporated in the market as traders decide that they want to see the proof in the pudding at the OPEC meeting in late November. The verbal intervention, like so many in the central banking world before now, hasn't worked. Investors want cold, hard cuts before going long it seems.

Now, back to Trump implications for the oil market.


Mark II Unitorque electric pumping unit at a crude oil well site outside South Heart, North Dakota.
Daniel Acker | Bloomberg | Getty Images
Mark II Unitorque electric pumping unit at a crude oil well site outside South Heart, North Dakota.

Helima Croft, OPEC-watcher and Global Head of Commodity Strategy at RBC Capital Markets, points out that a Trump victory could be followed by a rapprochement with Russia. This could mean lifting of Treasury sanctions on the Kremlin and a boost to investment in Russian energy assets. Does any of that sound bullish to the oil price? More investment in Russian infrastructure surely means more oil capacity from the world's largest producer, no?

On the other hand, Donald Trump opposes the Iranian nuclear deal, writes, RBC's Croft, adding "there is a real risk that he refuses to certify Iranian compliance… likely resulting in extraterritorial congressional sanctions snapping back, which could curb the enthusiasm of foreign companies looking to invest in Iran's energy sector.

Like in every other asset class a Trump victory would be such an unknown quantity and will no doubt add to underlying increases in volatility but for oil the ultimate question has to be 'will there be more or less oil consumption on the back of a Trump victory?'

Too soon to call surely but at the moment hard to see a bullish scenario.

Stephen Sedgwick co-anchors CNBC's flagship program "Squawk Box Europe" and is also CNBC's OPEC reporter.

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