King Abdullah’s Death Unlikely to Upset Saudi Oil Goals, Analysts Say
LONDON — The death of King Abdullah of Saudi Arabia
early Friday is unlikely to deter the desert kingdom from maintaining a
high level of oil production despite the recent sharp fall in prices,
analysts said.
Saudi
Arabia’s policy results from a consensus of the kingdom’s leadership
and energy experts, and it will not be easy to abandon, longtime
observers of Saudi Arabia say.
“There
is no near-term reason to modify the kingdom’s position,” said Sadad
Al-Husseini, a former executive vice president and board member of Saudi
Aramco, the national oil company, in a telephone interview.
Mr.
Husseini, who now runs his own energy consulting firm, noted that Saudi
Arabia had only fully detailed its position to maintain its oil
production quota at a November meeting of OPEC in Vienna and that it was
likely to wait for at least several months to see how the policy played
out.
“The kingdom is unlikely to reverse a policy that it has just announced with the outcome still evolving,” he said.
Reflecting
uncertainty over the continuity of Saudi policy, the price of Brent
crude, the international benchmark, rose nearly 2 percent to $49.45 a
barrel in Friday morning trading. Prices have fallen more than 50
percent since June amid a glut of production and slowing global demand.
So
far, the Saudis and other Persian Gulf producers appear convinced that
the market is substantially oversupplied. A long stable period of
relatively high prices has led producers, mostly outside OPEC, to make
huge investments in endeavors like Canadian heavy oil projects and
deepwater fields in Brazil, as well as the shale projects that have
greatly increased production in the United States.
The
Saudi and Gulf position is that it will take time for a shakeout to
occur among oil producers, which may eventually leave low-cost producers
in the Middle East in a stronger position.
“We
expect the Saudi oil policy to remain consistent under King Salman,”
said Richard Mallinson, an analyst at Energy Aspects, a market research
firm in London in an email to clients on Friday.
“While
it would be within his power to make dramatic changes and reverse the
current policy, there are no indications at present that he might do
so,” Mr. Mallinson said. “Saudi Arabia is almost certain to remain
focused on the long-term and its future position in the global oil
market.”
Nonetheless,
in recent interviews, even Gulf oil officials have said they were
surprised by how far and how fast prices have fallen. The expectation
around the Gulf appears to have been that a floor would have been found
in the $50 to $60 a barrel range.
A
clue to whether Saudi Arabia will change its stance under the new king,
Salman bin Abdul-Aziz Al Saud, will be whether its long-serving oil
minister, Ali al-Naimi, remains in his role. In recent years, Mr. Naimi,
who is 79, is said to have told friends that he would prefer to retire
and spend time on other pursuits like his role as chairman of a science
and technical university named after Abdullah. But he has stayed on at
the late king’s request.
Abdullah’s
death might be an appropriate time for the kingdom to switch oil
leaders, although there is no obvious candidate to succeed Mr. Naimi.
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