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| Saudi King’s Death Is Unlikely to Alter High Oil Output | |
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| LONDON — The death of King Abdullah of Saudi Arabia early Friday is unlikely to deter the desert kingdom from maintaining a high level of oil production despite the recent sharp drop in prices, analysts said. | LONDON — The death of King Abdullah of Saudi Arabia early Friday is unlikely to deter the desert kingdom from maintaining a high level of oil production despite the recent sharp drop in prices, analysts said. |
| Saudi Arabia’s policy results from a consensus of the kingdom’s leadership and energy experts, and it will not be easy to abandon, longtime observers of Saudi Arabia say. | Saudi Arabia’s policy results from a consensus of the kingdom’s leadership and energy experts, and it will not be easy to abandon, longtime observers of Saudi Arabia say. |
| “There is no near-term reason to modify the kingdom’s position,” said Sadad al-Husseini, a former executive vice president and board member of Saudi Aramco, the national oil company, in a telephone interview. | “There is no near-term reason to modify the kingdom’s position,” said Sadad al-Husseini, a former executive vice president and board member of Saudi Aramco, the national oil company, in a telephone interview. |
| Mr. Husseini, who now runs his own energy consulting firm, noted that Saudi Arabia had only fully detailed its position to maintain its oil production quota at a November meeting of OPEC in Vienna and that it was likely to wait for at least several months to see how the policy played out. | Mr. Husseini, who now runs his own energy consulting firm, noted that Saudi Arabia had only fully detailed its position to maintain its oil production quota at a November meeting of OPEC in Vienna and that it was likely to wait for at least several months to see how the policy played out. |
| “The kingdom is unlikely to reverse a policy that it has just announced with the outcome still evolving,” he said. | “The kingdom is unlikely to reverse a policy that it has just announced with the outcome still evolving,” he said. |
| Reflecting uncertainty over the continuity of Saudi policy, the price of Brent crude, the international benchmark, rose nearly 2 percent to $49.45 a barrel in Friday morning trading. Prices have fallen about 60 percent since June amid a glut of production and slowing global demand. | Reflecting uncertainty over the continuity of Saudi policy, the price of Brent crude, the international benchmark, rose nearly 2 percent to $49.45 a barrel in Friday morning trading. Prices have fallen about 60 percent since June amid a glut of production and slowing global demand. |
| The new ruler, King Salman, who was crown prince and a brother of Abdullah, said in a televised address on Friday that the kingdom would not change course and would maintain “the correct policies which Saudi Arabia has followed since its establishment.” This month, Salman seemed to endorse the current oil policies in a speech given on behalf of his brother. | The new ruler, King Salman, who was crown prince and a brother of Abdullah, said in a televised address on Friday that the kingdom would not change course and would maintain “the correct policies which Saudi Arabia has followed since its establishment.” This month, Salman seemed to endorse the current oil policies in a speech given on behalf of his brother. |
| So far, the Saudis and other Persian Gulf producers appear convinced that their cutting production in an oversupplied market would only benefit other producers. A long, stable period of relatively high prices has led producers, mostly outside OPEC, to make huge investments in endeavors like Canadian heavy oil projects and deepwater fields in Brazil, as well as the shale projects that have greatly increased production in the United States. | So far, the Saudis and other Persian Gulf producers appear convinced that their cutting production in an oversupplied market would only benefit other producers. A long, stable period of relatively high prices has led producers, mostly outside OPEC, to make huge investments in endeavors like Canadian heavy oil projects and deepwater fields in Brazil, as well as the shale projects that have greatly increased production in the United States. |
| The Saudi and Gulf position is that it will take time for a shakeout to occur among oil producers, which may eventually leave low-cost producers in the Middle East in a stronger position. | The Saudi and Gulf position is that it will take time for a shakeout to occur among oil producers, which may eventually leave low-cost producers in the Middle East in a stronger position. |
| “We expect the Saudi oil policy to remain consistent under King Salman,” said Richard Mallinson, an analyst at Energy Aspects, a market research firm in London, in an email to clients on Friday. | “We expect the Saudi oil policy to remain consistent under King Salman,” said Richard Mallinson, an analyst at Energy Aspects, a market research firm in London, in an email to clients on Friday. |
| “While it would be within his power to make dramatic changes and reverse the current policy, there are no indications at present that he might do so,” Mr. Mallinson said. “Saudi Arabia is almost certain to remain focused on the long-term and its future position in the global oil market.” | “While it would be within his power to make dramatic changes and reverse the current policy, there are no indications at present that he might do so,” Mr. Mallinson said. “Saudi Arabia is almost certain to remain focused on the long-term and its future position in the global oil market.” |
| Saudi Arabia is the most influential of the 12 OPEC members because it is by far the largest producer and the only one with the ability to substantially vary output to affect markets. In December, Saudi Arabia produced about 9.6 million barrels per day, a slight decline from the previous month, but still about 10 percent of the world total. | Saudi Arabia is the most influential of the 12 OPEC members because it is by far the largest producer and the only one with the ability to substantially vary output to affect markets. In December, Saudi Arabia produced about 9.6 million barrels per day, a slight decline from the previous month, but still about 10 percent of the world total. |
| In recent years, Saudi Arabia has adjusted its production in what has been a mostly successful effort to keep markets balanced and prices in the $100-a-barrel range. But as prices began falling last summer, the Saudis and their Gulf OPEC allies declined to intervene, contributing to the sharp drop. | In recent years, Saudi Arabia has adjusted its production in what has been a mostly successful effort to keep markets balanced and prices in the $100-a-barrel range. But as prices began falling last summer, the Saudis and their Gulf OPEC allies declined to intervene, contributing to the sharp drop. |
| Even Gulf oil officials in recent interviews have said they were surprised by how far and how fast prices have fallen. The expectation around the Gulf appears to have been that a floor would have been found in the range of $50 to $60 a barrel. | Even Gulf oil officials in recent interviews have said they were surprised by how far and how fast prices have fallen. The expectation around the Gulf appears to have been that a floor would have been found in the range of $50 to $60 a barrel. |
| A clue to whether Saudi Arabia will change its stance under the new king will be whether its long-serving oil minister, Ali al-Naimi, remains in his role. | A clue to whether Saudi Arabia will change its stance under the new king will be whether its long-serving oil minister, Ali al-Naimi, remains in his role. |
| In recent years, Mr. Naimi, who is 79, is said to have told friends that he would prefer to retire and spend time on other pursuits like his role as chairman of a science and technical university named after Abdullah. But he has stayed on at the late king’s request. | In recent years, Mr. Naimi, who is 79, is said to have told friends that he would prefer to retire and spend time on other pursuits like his role as chairman of a science and technical university named after Abdullah. But he has stayed on at the late king’s request. |
| Abdullah’s death might be an appropriate time for the kingdom to switch oil leaders, although there is no obvious candidate to succeed Mr. Naimi. | Abdullah’s death might be an appropriate time for the kingdom to switch oil leaders, although there is no obvious candidate to succeed Mr. Naimi. |
| There is little sign that Mr. Naimi faces near-term challenges at home. A career Saudi oil man, he is seen as having a rare combination of industry knowledge and the political savvy to manage the royal family and other constituencies in the kingdom. | There is little sign that Mr. Naimi faces near-term challenges at home. A career Saudi oil man, he is seen as having a rare combination of industry knowledge and the political savvy to manage the royal family and other constituencies in the kingdom. |
| Two of his top aides are Saudi princes, and they would most likely have made his views widely known to other members of the royal family. One of the princes, Abdel Aziz bin Salman, is the son of Salman. The prince, who has been involved with oil policy for decades, is often mentioned as Mr. Naimi’s potential successor. | Two of his top aides are Saudi princes, and they would most likely have made his views widely known to other members of the royal family. One of the princes, Abdel Aziz bin Salman, is the son of Salman. The prince, who has been involved with oil policy for decades, is often mentioned as Mr. Naimi’s potential successor. |
| Nonetheless, lower prices and falling income are not good news for an oil minister. Saudi Arabia and its Gulf allies like Kuwait and the United Arab Emirates have surprised many observers by not trimming production in the face of a glut, as has been their practice in the past. | Nonetheless, lower prices and falling income are not good news for an oil minister. Saudi Arabia and its Gulf allies like Kuwait and the United Arab Emirates have surprised many observers by not trimming production in the face of a glut, as has been their practice in the past. |
| Declining to play the role of swing producer inevitably makes Mr. Naimi a target of anger both inside and outside of OPEC, as oil companies halt planned projects and lay off workers and as oil-producing countries see their government coffers shrink. | Declining to play the role of swing producer inevitably makes Mr. Naimi a target of anger both inside and outside of OPEC, as oil companies halt planned projects and lay off workers and as oil-producing countries see their government coffers shrink. |
| The stress on Mr. Naimi, who is usually unflappable, was evident at the November OPEC meeting, when he snapped at at least one journalist asking about the oil market and declined to answer questions during the traditional interview session before the start of the gathering. | The stress on Mr. Naimi, who is usually unflappable, was evident at the November OPEC meeting, when he snapped at at least one journalist asking about the oil market and declined to answer questions during the traditional interview session before the start of the gathering. |
| While the Gulf producers may have substantial reserve assets to cushion the sharp falls of income, countries like Venezuela and to a lesser extent Algeria, Iran and Nigeria will be squeezed if low prices persist. | While the Gulf producers may have substantial reserve assets to cushion the sharp falls of income, countries like Venezuela and to a lesser extent Algeria, Iran and Nigeria will be squeezed if low prices persist. |