Market reaction: Oil prices mixed after Saudi king’s death

No significant change in Riyadh’s oil policy expected

NEW YORK: Oil prices traded narrowly mixed on Friday after the death of the king of Saudi Arabia, Organisation of the Petroleum Exporting Countries’ (OPEC) largest oil producer, and on concerns about unrest in Yemen.

The US benchmark futures contract, West Texas Intermediate for delivery in March, fell 72 cents to $45.59 a barrel, a new, nearly six-year low.

In London, Brent North Sea crude for March settled at $48.79 a barrel, up 27 cents from Thursday’s closing level.

Saudi Arabia’s King Abdullah, aged about 90, died early Friday and the royal family moved swiftly to show continuity in the country’s power structure and policies. Abdullah’s half-brother, Crown Prince Salman, was named the new king and, in his first public statement, vowed to “remain … attached to the straight path that this state has walked since its establishment.”

As the top producer in the OPEC, Saudi Arabia has been the driving force behind the cartel’s refusal to slash output to support oil prices, despite their rapid decline. Crude oil has lost about 60% of its value since June.

Tim Evans of Citi Futures noted that King Salman had affirmed that Saudi Arabian foreign and energy policy would be unchanged, with Ali Al-Naimi remaining energy minister.

Fatih Birol, the chief economist of the International Energy Agency, said he did not foresee major policy shifts.

“I do not expect any significant change in the oil policy of Saudi Arabia and I expect and hope that they will continue to be a stabilisation factor in the oil markets,” Birol told AFP on the sidelines of the World Economic Forum in Davos, Switzerland.

“I hope they will continue to contribute to the stability of the oil markets, especially in these days where we are going through difficult days,” he added.

Saudi Arabia has rejected calls from some members of the 12-nation OPEC to slash output, preferring instead to lower prices in a bid to gain market share.

Phil Flynn of Price Futures Group said that Brent, the European benchmark, had risen on increased turmoil in oil-producer Yemen, where the president resigned on Thursday amid a deadly standoff with Shiite militia controlling the capital. 

Published in The Express Tribune, January 25^th, 2015.

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