Image by Sergio Russo
The historic election in the U.S. which saw not only the election of Donald Trump as President, but a Republican dominated Congress, sets the stage for an uncertain month as OPEC members and Russia move towards a crucial meeting a month's end.
There's little doubt that should no limit in production be the outcome of the much anticipated gathering, oil will continue to founder and with it, the finances of many producing nations.
Adding to the opaque outlook is the direction the incoming Trump Administration will take on the energy file. If what the President-elect pledged during the campaign is correct, several takeaway's on energy will almost certainly affect oil's future.
The first is the approval of the Keystone XL pipeline which originally met all rigorous requirements over several years, but was nevertheless blocked by President Obama on the basis this would lead to furthering CO2 emissions in Alberta. An expected speedy approval would also fulfill another promise by President-elect Trump to remove the U.S. from the Paris Accord aimed at reversing global output of C02 emissions argued to be the primary source of global warming.
As well one would expect re-emphasis on coal use, thus providing a reversal of that industry's sagging fortunes in the U.S. Add to this the renogotiation of the North American Free Trade Agreement between Canada, the U.S. and Mexico and what emerges is a reprioritization of the American and global markets over the near term.
This brings us back to OPEC which seems unable, two years on, to come to any form of agreement on curbing the world's growing oversupply. Ironically, the likelihood of a less engaged incoming US government might turn out to be a gift for producers as the shift away from climate change agreements will almost certainly put a damper on renewables and the generous support they receive due to administrative targets. This could well provide a short window for oil's recovery beginning in the second quarter of 2017.
While it is only conjecture at this early stage, bets on where crude is headed will remain uncertain for the time being, or at least until January 20, inauguration day in Washington.
In the meantime, who becomes Secretary for Energy, State and the Interior are among the top favourites on the Washington watch list.