23 January 2015, News Wires – Following the death of King Abdullah bin Abdulaziz, Saudi Arabia’s new King Salman is likely to stick to his predecessor’s policy of ensuring adequate supplies to the global energy markets and safeguarding the kingdom’s market share despite faltering oil prices.
Abdullah, 90, had been in hospital since December and died in the early hours of Fridaylocal time following a bout of pneunomia.
Salman has been the effective ruler of Saudi Arabia in recent months as a dying Abdullah spent most of his time in hospital.
Weak oil price
Oil Minister Ali Naimi said last month that Saudi Arabia will not lower its massive output of 9.5 million barrels a day to prop up the oil market, even if the price crashed to $20 a barrel.
Saudi Arabia is well prepared to endure a prolonged downturn thanks to huge windfalls from high oil prices since 2011, that has enabled it to amass foreign reserves of about $750 billion.
The International Energy Agency (IEA) sees no major policy changes under Salman.
“With the death of the king, with the changes (in government), I do not expect any significant change in the oil policy of Saudi Arabia and I expect and hope that they will continue to be a stabilisation factor in the oil markets,” said IEA’s chief economist, Fatih Birol.
“I hope they will continue to contribute to the stability of the oil markets … especially in these days where we are going through difficult days.”
Future Saudi policy
Salman is likely to retain as oil minister Naimi, who has steered Saudi oil policy on behalf of the ruling Al-Saud family since 1995.
However even if Naimi decides to retire because of old age, few expect any changes, since major energy decisions are made by the Supreme Petroleum Council, which is headed by the king and made up of senior members of the royal family and several key ministers.
Of late, Saudi Arabia has abandoned its previous policy of defending prices by leading Opec production cuts in favour of maintaining its market share.
The kingdom is betting that lower prices will eventually muscle out high-cost producers and hit shale in the US, thereby establishing the supremacy of Opec countries, which have the lowest production costs in the world.
The chief executive of state oil company Saudi Aramco said on Wednesday it will take some time for the oil market to rebalance.
Khalid al-Falih said expectations of higher prices had been shaken to a large degree, but the market will balance itself in due course.
Profile of a new king
King Salman, 79, was governor of Riyadh Province for 48 years before becoming defence minister in 2011 and crown prince a year later.
He has been effectively running the country in the past year by taking on the duties of the king as Abdullah’s health deteriorated.
Salman moved quickly to ensure smooth succession by appointing his half-brother, Prince Muqrin, as the new crown prince.
Salman is part of an influential faction within the royal family formed of sons and grandsons of the late King Abdulaziz by a favourite wife, Princess Hassa al-Sudairi.
After the deaths of the former king, Fahd – who ruled from 1982 until 2005 – and two previous crown princes, Sultan and Nayef, Salman was already the most powerful surviving member of this faction.