Oil climbs as Saudi king’s death feeds market uncertainty
Oil prices climbed higher on Friday as the death news of Saudi Arabia’s King Abdullah added to uncertainty in energy markets already facing some of the biggest moves in decades.
Abdullah died early on Friday and his brother Salman became king in the world’s top oil exporter.
Salman named his half-brother Muqrin as heir, moving to forestall any series crisis at a moment when Saudi Arabia faces record turmoil on its borders and in oil markets.
Brent crude futures climbed to $49.70 a barrel by 0808 GMT, up $1.18 a barrel. U.S. WTI crude futures were at $47.31, up one dollar.
“This little spike in prices is reasonable. But this is a selling opportunity in our analysis. It should be sold off quickly and it won’t last long at all,” said Mark Keenan of French Bank Societe Generale.
After considering strong volatility and price drops earlier in January, oil markets have jumped little this week, with Brent prices range-bound between $47.78 and $50.45 a barrel.
The new king is likely to continue an OPEC policy of keeping oil production balanced to defend the cartel’s market share from opponent producers.
“When King Salman was still crown prince, he very recently spoke on behalf of the king, and we mark no change in energy policy at all,” Keenan said.
Market analysts said almost similarly as important as the royal succession to energy markets would be whether Saudi oil minister Ali Al-Naimi, in office since 1995, might step down.
“The actual question is if there is a new oil minister soon,” asked FGE analyst Tushar Bansal, adding that Al-Naimi had apparently wanted to step down but been persuaded by King Abdullah to stay on.
Abdullah’s death comes in the middle of some of the biggest moves in oil markets in decades. Oil prices have more than halved since peaking last June as soaring supplies clash with strong demand.
Booming U.S. shale production has turned the United States from the world’s biggest oil importer into one of the top producers, pumping out over 9 million barrels per day.
Data from the Energy Information Administration on Thursday showed the biggest build in U.S. crude inventory in at least 14 years, driving Brent and WTI prices <cl-lco1=r> apart. [EIA/S]
To combat soaring output and falling prices, many oil exporters, such as Venezuela, wanted the 12-member Organization of the Petroleum Exporting Countries (OPEC) to cut output in order to support prices and revenues.
Yet, led by Saudi Arabia, OPEC announced last November it would keep output steady at 30 million barrels per day.