Saudi reshuffle brings oil dips

April 29, 2015 08:22 AM

Oil prices steadied on Wednesday after news that King Salman of Saudi Arabia had altered the kingdom's line of royal succession in a reshuffle that also affected leadership of the national oil company, Saudi Aramco.

King Salman bin Abdulaziz sacked his younger half-brother as crown prince and appointed his nephew, deputy crown prince Mohammed bin Nayef, as the new heir apparent.

He also made his son, Prince Mohammed bin Salman, deputy crown prince, and appointed Saudi Aramco Chief Executive Khalid al-Falih as chairman of the state oil firm and health minister.

Saudi reshuffles often move oil prices as stability in the world's biggest oil-exporting country is key to global supplies, but Wednesday's announcement had little obvious impact.

Brent crude oil was up 15¢ at $64.74 a barrel by 1255 GMT (8.55 a.m. EDT). U.S. crude was down 16¢ at $56.90.

A question mark remained over who would replace Khalid al-Falih in the key CEO role at the national oil giant and whether his appointment as health minister meant he was now out of the running to become oil minister.

Mohammad Al Sabban, a former senior adviser to Oil Minister Ali al-Naimi, said he expected Saudi policy to be unchanged.

"There will be no change in oil policy at all. The policy is not subject to change at every cabinet reshuffle," Al Sabban said.

Clement M. Henry, professor at Middle East Institute, National University of Singapore, agreed:

"I don't think there's been any disagreement about the idea of keeping up production, maintaining market share, refusing to be a swing producer," Henry said.

The post of Aramco chairman had been held by Naimi, 79, himself a former chief executive of the company, who remains in the ministerial position he has occupied for 20 years.

Falih, who became Aramco CEO in 2009 after a 30-year career in the company, has long been considered a possible successor to Naimi as oil minister.

"The Saudi king's death a few months ago did not have a long-lasting impact on prices, so these changes may not either," said Tamas Varga, analyst at London brokers PVM Oil Associates.

Oil fundamentals pointed to more market weakness in the short term, analysts said.

"Supply growth in many markets is still too rapid and high inventory levels are likely to be a drag on prices for some time," Barclays analysts said in a note to clients.

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