By Himanshu Ojha
Brent crude oil rose on Friday after the death of Saudi Arabia’s king added to uncertainty in oil markets, although the new ruler indicated immediately there would be no policy change.
Brent crude rose to a high of $49.80, up $1.28 a barrel, before easing to around $49.20 by 1515 GMT. U.S. light crude oil rose to $46.41, up 10 cents.
King Abdullah bin Abdulaziz died early on Friday and his brother Salman became king of the world’s top oil exporter.
Salman named his half-brother Muqrin as heir and nephew Mohammed bin Nayef, 55, as Deputy Crown Prince, moving to forestall any succession crisis at a moment when Saudi Arabia faces unprecedented turmoil on its borders.
Saudi state television said King Salman intended to keep oil minister Ali al-Naimi in place, suggesting the country’s oil policy would remain unchanged.
Hans van Cleef, senior energy economist with ABN Amro, said oil investors were worried about a possible change in Saudi oil policy and the security of the kingdom, but repeated assurances of continuity from Riyadh, helped calm the market.
“There was only a spike in prices over these tensions and they eased afterwards,” van Cleef said.
The new Saudi king is expected to continue an OPEC policy of keeping oil output steady to protect the cartel’s market share from rival producers.
Abdullah’s death comes amid some of the biggest shifts in oil markets in decades. Oil prices have fallen by almost 60 percent since peaking last June as soaring supplies of shale oil from North America have coincided with cooling demand.
Booming U.S. production has turned the United States from the world’s biggest oil importer into one of the top producers, pumping out over 9 million barrels per day.
Data from the Energy Information Administration on Thursday showed the biggest build in U.S. crude inventory in at least 14 years, driving Brent and WTI prices
To combat soaring output and falling prices, many oil exporters, such as Venezuela, wanted the 12-member Organization of the Petroleum Exporting Countries (OPEC) to cut output in order to support prices and revenues.
Yet, led by Saudi Arabia, OPEC announced last November it would keep output steady at 30 million barrels per day.
Many analysts remain bearish on the outlook for oil and this view was echoed by Saudi Prince Alwalees Bin Talal, who told CNBC news that in his view the market had further to fall:
“We have not seen the bottom yet, maybe.”