1. Saudi king’s death unsettles oil market, drives up prices

Saudi king’s death unsettles oil market, drives up prices

Media reports say new king may keep ‘correct policies’ unchanged

By: | New Delhi | Published: January 24, 2015 12:09 AM

Global oil prices moved up in intraday trade on Friday on uncertainties following the death of Saudi Arabia’s King Abdullah before trimming gains after state-run media reports indicated new king Salman could keep “correct policies” unchanged. Still, analysts believed any perceptible change even in the larger existing set-up could potentially influence oil prices in the coming days.

Brent crude oil futures shot up as much as 2.6%, while US crude gained 3.1% after the Saudi royal court announced the death early on Friday, as investors feared the world’s largest oil exporter might review its recent decision not to trim output despite a sharp plunge in oil prices.

However, the prices eased a tad after state-run Saudi Press Agency reported that oil minister Ali Al-Naimi — who had spearheaded the Organisation of Petroleum Exporting Countries (Opec) decision in November to preserve market share against fierce competition from US shale producers — would continue in his post, suggesting a policy status-quo.

Brent crude for March delivery touched $49.58 a barrel on the ICE Futures Europe exchange at 6.52 pm (ET), still up 2.2%. WTI crude for March was trading up by 1.7% at $47.10 per barrel.

Abdullah’s death comes at a crucial time for Saudi Arabia as oil prices have shed more than a half in one year and the International Monetary Fund this week forecast an almost 38% fall in prices for 2015. Politically, too, the situation in West Asia is critical, thanks to Syria’s civil war, turmoil in Egypt and the rise of Islamic militants in Iraq.

The global oil market has already been experiencing a glut, caused by the highest US stocks in at least three decades and Opec’s reluctance to cut output.

Compounding producers’ worries, any credible signs of a demand rebound anytime soon remained elusive, as the Chinese and European economies continue to falter.

Oil prices dropped by roughly 35% since November 27 when the Opec, accounting for roughly 40% of global supplies, chose not to cut production, signalling a price war with producers outside the cartel, especially US shale oil drillers.

Moreover, the International Energy Agency earlier this month effected another downward revision of global oil demand, saying it would rise only 230 000 barrels a day in 2015, while supply outside Opec is expected to climb by 1.3 million barrels per day to 57.8 million.

Demand for Opec crude was forecast to sink by 300 000 bpd next year to 28.9 million.

Morgan Stanley forecast in December that in the worst worst-case scenario, the North Sea crude benchmark could drop to as low as $43 a barrel in the second quarter of next year.

Crude story

* Brent crude oil futures shot up as much as 2.6%, while US crude gained 3.1% after the Saudi royal court announced the death early on Friday
* Saudi Press Agency reported that oil minister Ali Al-Naimi — who spearheaded Opec’s decision in November to preserve market share against fierce competition from US shale producers — would continue in his post, suggesting a policy status-quo
* Abdullah’s death comes at a crucial time for Saudi Arabia as oil prices have shed more than a half in one year and the International Monetary Fund this week forecast an almost 38% fall in prices for 2015

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