Death of King Unlikely to Alter Saudi Oil Policy

Saudi Arabia has charted a long-term course to drive down oil prices and maintain its major share of the global market—and a change of who is on the throne in Riyadh won’t likely alter this course, energy experts said.

Even after the death of King Abdullah, announced early Friday, the kingdom is likely to continue to pump crude in the face of a global glut, which has helped push prices down by more than 55% since last June.

Surrounded by unrest and uncertainty in the Middle East, Saudi Arabia is protecting itself by exploiting its big advantages—huge oil reserves and low-cost crude production, said Sarah Emerson, principal of ESAI Energy LLC in Boston.

“They need to make sure they have enough market share for not just tomorrow but 2040 and 2060 and beyond to ensure longevity,” Ms. Emerson said. The Saudis embarked on this new strategy in reaction to the U.S. oil boom, and it is a new status quo that won’t change under a new king, she said.

That doesn’t mean that in the short term, oil traders won’t be nervous about the ascension to the throne of the new king, Salman, or that oil markets won’t be volatile.

Crude-oil futures rebounded in Asia early Friday, trading at $47.10 a barrel, up from a settlement price of $46.31 a barrel on the New York Mercantile Exchange Thursday. Brent crude...up 84 cents to $49.36 a barrel....

The country’s current strategy has the backing of its powerful oil minister, Ali al-Naimi, so investors and traders will be watching for the possibility that a change of oil ministers could be afoot. Some Saudi experts say it is unclear if the behind-the-scenes power struggle over who has influence over King Salman is finished and whether the kingdom’s princes have coalesced around him.

Same perspective, different source:

King Abdullah’s death not expected to change oil policyhttp://fuelfix.com/blog/2015/01/22/king-of-saudi-arabia-dead-at-90/

King Abdullah of Saudi Arabia has died at 90, according to the Associated Press.

Abdullah’s 79-year-old brother, Salman, has succeeded him as king. King Salman named his half-brother, Muqrin, as his crown prince and heir.

Abdullah took the throne in 2005 after the death of his brother, King Fahd. The ailing king was was admitted to a hospital in Riyadh for pneumonia in late December, according to the state-run Saudi Press Agency.

The king’s death is not expected to change oil policy — at least over the short term.

Amy Myers Jaffe, an expert on global energy policy at University California-Davis, told FuelFix last week that she didn’t think a change in the country’s leadership would have dramatic impacts on the global energy landscape.

“I think the current policy is vetted across all of these people,” Jaffe said, referring to the top echelons of the Saudi royal family, when asked about the then-ailing king. “I don’t think there’s any disagreement about the current policy. So if the king dies, same policy.”

Andy Lipow, president of Houston’s Lipow Oil Associates, said Thursday night he doesn’t expect any near-term change in Saudi oil production or exports.

But he predicted: “Prices will rise as the market fears the uncertainty surrounding the potential for a change in Saudi policy which could lead to more accommodation with other members of OPEC resulting in a production cut.”

According to Michelle Michot Foss, chief energy economist and program manager at the Bureau of Economic Geology’s Center for Energy Economics at the University of Texas’ Jackson School of Geosciences: The “succession plan is already in place. Everyone was expecting this. No change.”

In November, the Organization of the Petroleum Exporting Countries decided to maintain its 30 million barrel per day quota rather than cutting production to push up oil prices. Saudi Arabia is the group’s leading producer. The country is widely seen as being willing to keep oil prices low in an effort to maintain its share of the global market at a time when production from the United States is surging.

Its leaders have made statements in recent months suggesting their commitment to current production levels.

“Stability is critical and I don’t expect any changes in oil policy before the objectives are met,” Fadel Gheit, an analyst with Oppenheimer, said Thursday night.

In a speech earlier this month, Abdullah acknowledged tensions facing the global market.

“These tensions aren’t new to the oil market, and we’ve dealt with them in the past with a solid will, with wisdom and experience, and we will deal with the current developments in the oil markets in the same way,” he said, according to a Bloomberg report.

Saudi Arabia remains the second largest source of crude oil imported into the U.S., according to data from the Energy Information Administration. Total Saudi exports to the U.S. totaled 25.6 million barrels per day in October.

President Barack Obama noted the continued relationship between Saudi Arabia and the U.S. in a statement released soon after Abdullah’s death.

“As a leader, [King Abdullah] was always candid and had the courage of his convictions. One of those convictions was his steadfast and passionate belief in the importance of the U.S.-Saudi relationship as a force for stability and security in the Middle East and beyond,” Obama said in the statement.

“The closeness and strength of the partnership between our two countries is part of King Abdullah’s legacy.”

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