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Oil markets shrug at Trump election win

While equity markets around the globe were rattled by the news of a Trump win, crude futures were unfazed

Donald Trump's election as the 45th US President was a surprise victory, after polls forecast a tight, yet certain win for Hillary Clinton.

By the time equity markets opened in London, Trump had won majority support in key states including Florida, Iowa, Ohio and North Carolina. At this stage it became clear that the next leader of the free world would be a Republican.

By around 9am UK time, while the 131m votes cast were still being counted, Trump had won almost 280 electoral college votes out of a total of 538 (Clinton had just 218) and the Republican party had retained control of the US senate.

Equity markets reacted immediately, slumping in Asia and Europe as traders began to digest the news. More volatility is likely to follow.

Crude markets, however, remained buoyant in the immediate aftermath of Trump's political victory. Brent and WTI futures remained within fairly tight ranges, trading around $45.50 a barrel and $44.50/b respectively in morning trading on 9 November.

While the wider and longer-term macroeconomic impact of plunging equity markets on global crude demand is unclear, a Trump win will be bullish for crude markets. This is because any depreciation of the US dollar will make buying crude and oil products for other countries cheaper, bolstering prices and potentially raising consumption.

Macroeconomic headwinds also make the chances of the US Federal Reserve raising interest rates more unlikely.

And for the US upstream, a Trump presidency will be far more bullish than a Clinton win would have been.

While uncertainties remain around many areas of Trump's energy policies, he has been clear on two things: he will promote policies which boost fossil fuel production and he will champion a relaxation of drilling regulations to raise crude output.

What a Trump presidency means for US international relations is unclear. He has made several inflammatory statements lambasting any need to import energy from Opec members or "any nations hostile to [US] interests". Eliminating Opec crude from US oil supply is not immediately possible, as the group provides around 30% of the country's total imports. This is especially true while US drilling rates have yet to see a significant recovery.

A Trump win may however put more pressure on US natural gas prices, which have been buoyed recently by taking a rising share in the country's power mix.

Last year gas overtook coal as the country's top fuel for power generation .

Since then, gas demand in the country's power generating sector has soared, helping to draw down bulging stocks.

Trump's call for a reversal of the moratorium on new leases for coal mined from federal lands - introduced by President Obama at the beginning of this year - could increase coal consumption and cause gas prices to slump again.

However, in the short-term, a Trump win will not have a significant impact on oil or gas markets, which will remain focused on the fundamentals.

Once crude markets have digested the news of a Trump victory, the focus will return to the most crucial question of this year: whether Opec will manage to implement a group-wide output freeze deal in Vienna at the end of this month.

If the group does not manage to agree on exactly how, and more importantly who will freeze or cut oil output, at its next meeting, crude markets will face many more headwinds than the macroeconomic fallout from a Trump presidential win.

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