King Abdullah’s death means a new king, but not necessarily new policy
Oil prices were up initially on news of the late King Abdullah of Saudi Arabia’s passing with hopes that the new king might change the direction of Saudi oil policy, but are down again as investors see little hope for a change.
West Texas Intermediate (WTI) had risen as much as 3.1% in overnight trading, but turned negative during the morning session, down $0.21, or 0.4%, at $46.10 per barrel on NYMEX. The global Brent benchmark hit $49.80 per barrel, or 2.6% above Thursday’s settlement, but gave back its gains, with the front-month March contract recently up $0.65, or 1.3%, at $49.17 per barrel on the ICE Futures Exchange, reports the Wall Street Journal.
The death of King Abdullah fueled speculation that his successor, younger half-brother King Salman bin Abdul-Azia Al Saud, might take a different stance on oil production than the late king. News today indicates that Salman has decided to keep Oil Minister Ali al-Naimi rather than replacing him with a new minister of his own, however, indicating that Saudi Arabia’s oil policy will remain largely unchanged.
Salman issued a royal decree to retain current ministers, reports BNN. Al-Naimi led OPEC’s decision to maintain production at current levels in order to protect the Kingdom’s market share. Salman said on Saudi national television that he will maintain the policies of his predecessor.
The decision on continued policy does not rest solely with the king, either. “Their policy has never depended on one individual, certainly not on a 90-year-old man who was largely absent from public life,” said Julian Jessop, global chief economist at Capital Economics.
In theory, oil policy is decided by a Supreme Petroleum Council headed by the king and made up of senior members of the royal family, ministers and industry leaders. In practice, it has fallen largely to al-Naimi, a practice that will carry over with the announcement that he will remain Oil Minister.
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