Brent dips to $64.20 on oversupply after news King Salman of Saudi Arabia has altered line of royal succession in kingdom
LONDON — Oil prices dipped on Wednesday on oversupply after news King Salman of Saudi Arabia had altered the line of royal succession in the kingdom in a dramatic reshuffle.
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 appointed his son, Prince Mohammed bin Salman, as deputy crown prince, and replaced veteran foreign minister Prince Saud al-Faisal with the kingdom’s Washington ambassador Adel al-Jubeir as well as appointing several other ministers.
Saudi reshuffles often move oil prices as stability in the world’s biggest oil exporting country is key to global supply.
Traders and analysts said it was not clear how Saudi oil policy might be affected by the changes at a time when the oil market was oversupplied and facing a seasonal dip in demand.
"I don’t think there’s been any disagreement about the idea of keeping up production, maintaining market share (and) refusing to be a swing producer," said Prof Clement M Henry from the Middle East Institute at the National University of Singapore.
Volume in Brent crude oil dropped sharply after the Saudi announcement at about 1.30am GMT, only picking up some hours later when European markets began trading.
Brent crude oil was down 44c at $64.20 a barrel by 8.20am GMT. US crude was down 50c at $56.56.
"The Saudi king’s death a few months ago did not have a long-lasting impact prices, so these changes may not either," PVM Oil Associates analyst Tamas Varga said.
Oil fundamentals point to market weakness, analysts say.
"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.
Slow economic growth is also weighing on prices.
In the US, growth is expected to have braked sharply in the first quarter as harsh weather dampened consumer spending and energy companies cut investment.