Saudi Reshuffle Could Completely Shake Up Oil Markets
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2017-06-25 15:53:40

Saudi Reshuffle Could Completely Shake Up Oil Markets

The power restructuring in Saudi Arabia this week led to the elevation of 31-year-old Muhammed bin Salman to crown prince, essentially ensuring that he will become the youngest king of Saudi Arabia in the not-too-distant future.

 

 

The heir apparent has already been effectively running the country for the past few years, so the move was not entirely a shock. Nevertheless, the effects on the oil market could be profound.

 

 

The new crown prince is known to be a bit unpredictable. In the early phase of the oil price meltdown, he said that prices did not matter. But the plunge below $30 per barrel in early 2016 seemed to have changed the calculus. Last year Saudi Arabia became the principle driver behind a return to “market management,” that is restraining output to stabilize prices.

 

 

With the OPEC production cuts – which have had to be extended from six to 15 months – still proving to be insufficient at balancing the market, it is not entirely impossible that the crown prince might reverse course yet again at some point and return to a “market share” strategy. Or he could decide to deepen the cuts, an idea floated a few days ago by the Iranian oil minister.

 

 

For now though, higher prices are surely to be the goal, particularly with the IPO of Saudi Aramco not far off. Either way, after Mohammed bin Salman and King Salman ousted former oil minister Ali al-Naimi last year, they have tighter control over the kingdom’s oil policy.

 

Meanwhile, the crown prince is also known to be aggressive and bellicose when it comes to Saudi Arabia’s position in the Middle East. As such, his promotion brings ominous possibilities in regards to the simmering conflict between Saudi Arabia and several of its regional rivals. Bin Salman is behind Saudi Arabia’s disastrous and bloody conflict in Yemen, which has been very costly and brought no discernable strategic benefit to the kingdom.

 

 

He is also known to be extremely hawkish towards Iran. This is an issue that would certainly push up oil prices if it got out of hand.

 

 

There is no way to predict how a confrontation between the two countries would play out, but any prospect of oil supply disruption would ripple through the oil market even as it currently remains oversupplied.

 

pk.shafaqna.com

 

 

Categories:   Business ،
Tags:   Saudia ، Muhammad Bin Salman ، oil ،
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