Millennium Post

Oil prices surge on Saudi King Abdullah’s death

US benchmark West Texas Intermediate (WTI) for March delivery soared as much as 3.1 per cent in New York after the Saudi royal court announced the death. In early morning Asian trade, the contract was up $73 cents, or 1.58 per cent, at $47.04 a barrel. Brent crude for March jumped $1.09, or 2.25 per cent, to $49.61.

The surge in prices comes after months of steep falls caused by weak global demand, an oversupply of the black gold and a refusal by the OPEC cartel, of which Saudi Arabia is a key member, to cut down on output. “The market is probably uncertain over what the new king would do about this over supply issue,” said Daniel Ang, an investment analyst with Phillip Futures in Singapore.

“The market was just pricing this uncertainty,” he said. King Abdullah bin Abdulaziz died on Friday and was replaced by Crown Prince Salman, the royal court said in a statement.

Analysts said focus will turn to whether Salman, 79, keeps Ali al-Naimi as the country’s oil minister since 1995. “The Saudi leadership has already taken the tough decision to live with lower oil prices,” Florence Eid-Oakden, chief economist at London-based consultants Arabia Monitor, said by phone.

Saudi is the main producer in the Organisation of the Petroleum Exporting Countries (OPEC) whose decision in late November not to cut production levels despite a supply glut accelerated the fall in oil prices. OPEC’s 12 members, which supply about 40 per cent of the world’s oil, kept their combined output target at 30 million barrels a day during a November 27 meeting.
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