Will Saudi Arabia’s new King Salman change the late King Abdullah’s oil policy and cut oil production to raise the oil price? No, says Bloomberg, at least for now, though the news of King Abdullah’s death made the oil shorts greatly nervous forcing the weak into covering. At 79 and reportedly in poor health, Saudi Arabia’s aged leadership adds yet more uncertainty into a Middle East increasingly in violent turmoil. For now the price of Brent crude is still struggling to hold just below 50.
King Salman, Saudi Arabia’s new ruler, will probably stick to the oil policy of his predecessor, the late King Abdullah, maintaining production levels to preserve market share even at the cost of depressing prices.
A key indicator will be whether Salman, 79, retains the oil minister, Ali al-Naimi, who has driven decision-making since 1995. Al-Naimi, who turns 80 this year, has said he’d like to devote more time to his other job as the chairman of the science and technology university named after the late sovereign.
With production of 9.5 million barrels a day and exports of 7 million a day, Saudi Arabia accounts for more than a 10th of global supply and a fifth of the crude sold internationally.
The kingdom’s refusal to surrender market share to rising U.S. production has contributed to the worst price slump since the global financial crisis of 2008.
“The Saudi leadership has already taken the tough decision to live with lower oil prices,” Florence Eid-Oakden, the chief economist at Arabia Monitor, a London-based consultant, said by phone. “Naimi is well-established, he’s respected and there shouldn’t be a change as long as the current cabinet is in place.”
Salman, in his previous capacity as crown prince, read a speech on behalf of the monarch on Jan. 6 that confirmed the continuity of Saudi oil policy in the face of market “tensions” caused by slow growth in the global economy.
Oil fell almost 50 percent last year as the U.S. pumped at the fastest rate in more than three decades and OPEC resisted calls to cut output. Crude stockpiles in the U.S., the world’s biggest oil consumer, rose by 10.1 million barrels through Jan. 16, the Energy Information Administration reported on Thursday. That was the biggest volume gain since March 2001.
Saudi Arabia’s New King Will Likely Stick With Current Oil Policy
A key indicator will be whether Salman, 79, retains the oil minister, Ali al-Naimi, who has driven decision-making since 1995. Al-Naimi, who turns 80 this year, has said he’d like to devote more time to his other job as the chairman of the science and technology university named after the late sovereign.
With production of 9.5 million barrels a day and exports of 7 million a day, Saudi Arabia accounts for more than a 10th of global supply and a fifth of the crude sold internationally.
The kingdom’s refusal to surrender market share to rising U.S. production has contributed to the worst price slump since the global financial crisis of 2008.
“The Saudi leadership has already taken the tough decision to live with lower oil prices,” Florence Eid-Oakden, the chief economist at Arabia Monitor, a London-based consultant, said by phone. “Naimi is well-established, he’s respected and there shouldn’t be a change as long as the current cabinet is in place.”
Salman, in his previous capacity as crown prince, read a speech on behalf of the monarch on Jan. 6 that confirmed the continuity of Saudi oil policy in the face of market “tensions” caused by slow growth in the global economy.
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Oil fell almost 50 percent last year as the U.S. pumped at the fastest rate in more than three decades and OPEC resisted calls to cut output. Crude stockpiles in the U.S., the world’s biggest oil consumer, rose by 10.1 million barrels through Jan. 16, the Energy Information Administration reported on Thursday. That was the biggest volume gain since March 2001.
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Oil Drillers ‘Going to Die’in 2Q on Crude Price Swoon
Companies that drill wells and manage fields on behalf of oil producers will be the first to fall after the benchmark American crude, West Texas Intermediate, lost 57 percent of its value in seven months, said John T. Young, whose firm led the city of Detroit through its 2013 bankruptcy.
Oil companies have slashed thousands of jobs, delayed billions of dollars in projects and dropped or scaled back expansion plans in response to the prolonged rout in crude prices. For oilfield service providers that test wells and line the holes with steel and cement, the impact of price reductions forced upon them by explorers will start to pinch hard during the second quarter, Young said Thursday.
“The second quarter is going to be devastating for the service companies,”Young said in a telephone interview from Houston. “There are certainly companies that are going to die.”
Jan 22, 2015 9:39 PM GMT
Oil drillers will begin collapsing under the weight of lower crude prices during the second quarter and energy explorers who employ them will shortly follow, according to Conway Mackenzie Inc., the largest U.S. restructuring firm. Companies that drill wells and manage fields on behalf of oil producers will be the first to fall after the benchmark American crude, West Texas Intermediate, lost 57 percent of its value in seven months, said John T. Young, whose firm led the city of Detroit through its 2013 bankruptcy.
Oil companies have slashed thousands of jobs, delayed billions of dollars in projects and dropped or scaled back expansion plans in response to the prolonged rout in crude prices. For oilfield service providers that test wells and line the holes with steel and cement, the impact of price reductions forced upon them by explorers will start to pinch hard during the second quarter, Young said Thursday.
“The second quarter is going to be devastating for the service companies,”Young said in a telephone interview from Houston. “There are certainly companies that are going to die.”
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