Oil prices outlook: What will happen after the death of Saudi King Abdullah? . . . . . . . . . . . . The death of Saudi King Abdullah and the transfer of authority to his successor Crown Prince Salman bin Abdulaziz has raised questions about whether there will be a change in Saudi Arabia’s policy regarding oil production amid the undergoing sharp fall in crude prices. Following the announcement of the death of King Abdullah on Friday, the impact on oil prices was muted, as Brent crude fell slightly to close at $48.60 a barrel while the fall of crude oil was a little bit stronger as it dropped to $45.28 from the opening price of $46.59. Many analysts predict to see no change in Saudi Arabia’ policy concerning oil production due to the smooth transition of leadership to the new King, who would remain committed to the same policies of his predecessor, which reject any calls of slashing oil production. In addition, naming the upcoming two Crown Princes of the Kingdom reflect the uniformity inside the royal family. “I pledge to remain, with God`s strength, attached to the straight path that this state has walked since its establishment, King Salman said in his first public statement. I don`t anticipate the Kingdom to make any dramatic changes in its oil policy in the short term, said Fahad Nazer, a former political analyst at the Embassy of Saudi Arabia in Washington, DC. Saudi Arabia to maintain oil market share Oil prices have lost almost 50 percent of its value since hitting a June peak of $115 a barrel, due the glut of oil production and weakness in global demand. Saudi Arabia, the world’s biggest oil exporter and holder of 16% of the world`s known oil reserves, led its OPEC colleagues on November 30 to keep oil production of the oil cartel, which accounts for nearly 40 percent of global oil production, unchanged at around 30 million barrels per day. Although the price of crude oil represents 90 percent of Saudi Arabia’s public income, the Kingdom seems to insist keeping its hands off the market, leaving the price to be set by market forces. The biggest producer in OPEC chose to keep its market share unchanged with nearly 9.6 million barrels per day, as it continues to benefit from its low-cost production for oil. Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Naimi has mentioned in more than occasion that his country would never cut oil production even if prices continued its plunge. For now, the Kingdom can withstand the low oil prices using its huge reserves, totaling 905 billion riyals at the end of October, to finance the deficit, where the reserves could cover deficits with the same size expected in 2015 for about six years. The Saudi government approved its 2015 state budget, with a shortfall of 145 billion riyals ($39 billion), yet government spending will edge up by 0.6 percent to a record high in 2015. Over the long term, Saudi Arabia may be capable of knocking out high-cost oil producers, more specifically U.S. shale producers, and thereby helping the price to stabilize again. The U.S., once known as the world’s biggest oil importer, has managed to turn the tables in the market by pumping more than 9 million barrels per day. Oil prices outlook Brent crude for March’s delivery has been showing a sideways movement since touching a cliff of $46.39, where it has found some support. The breach of the support line depicted on the daily chart could push prices down further, while, on the other hand, prices may rebound to $50-$52 levels as the price became extremely oversold. The RSI momentum indicator is currently hovering slightly above the 30 line, doing an attempt to rebound to the aforesaid targeted areas. #egyptyard
Posted on: Mon, 26 Jan 2015 12:49:46 +0000
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