Sat, Jan 24, 2015 - Page 13 News List

Oil sheds gains as Riyadh says no policy change

SHORT-TERM:The new Saudi king’s statement on continuing the policies of his predecessor sent oil prices drifting downward after advancing earlier

Bloomberg

Oil prices pared gains following the death of King Abdullah of Saudi Arabia, as his successor said policies would not change in the world’s largest crude oil exporter.

Futures climbed by as much as 2.6 percent in London and 3.1 percent in New York after the Saudi royal court announced the death in a statement yesterday. Saudi Arabian Crown Prince Salman bin Abdulaziz, who succeeds Abdullah on the throne, said he would maintain his predecessor’s policies.

Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Naimi, who led OPEC’s decision in November to defend the cartel’s market share against surging US shale supplies, remains in his post, according to state-run Saudi Press Agency.

“It was expected that the oil market would react nervously to the king’s death,” said Giovanni Staunovo, an analyst at UBS AG in Zurich. “But it’s likely to be a short-term reaction as the majority of market participants don’t expect a change in Saudi policy.”

“Since the bounce, prices have drifted lower again,” Staunovo said.

Oil prices have slumped 37 percent since OPEC’s accord on Nov. 27 to maintain production at 30 million barrels per day amid a glut caused in part by the fastest US output in three decades.

Saudi Arabia’s oil strategy is likely to remain unchanged as King Salman assumes power, according to Bank of America Corp.

Brent crude for March settlement advanced by as much as US$1.28 to US$49.80 per barrel on the ICE Futures Europe exchange and traded for US$49.55 per barrel as of 8:49am local time. The grade has lost 1.3 percent this week.

Brent, used to price more than half the world’s oil, traded at a premium of US$2.39 to West Texas Intermediate, compared with US$1.04 on Jan. 16.

West Texas Intermediate for March delivery gained as much as US$1.45 to US$47.76 per barrel in electronic trading on the New York Mercantile Exchange. Total volume was about 28 percent more than the 100-day average for the time of day. Prices have lost 3.1 percent this week.

“We do not expect a near-term change in economic and energy policy from the transition” as Salman’s recent comments “do not foreshadow a major change,” while al-Naimi is trusted and has been in place for many years, analysts at Bank of America said in a report yesterday.

King Abdullah oversaw a fivefold expansion in the size of the Arab world’s biggest economy and met the Arab Spring with a mixture of force and largesse. He died after almost a decade on the throne. He was born in 1924.

“The passing of King Abdullah is going to increase uncertainty and increase volatility in oil prices in the near term,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co, said by telephone.

“I wouldn’t expect a change in policy in the near term to be known, but the passing comes at a challenging time for Saudi Arabia,” Beveridge said.

This story has been viewed 2363 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top