Close button
The Guardian
Email YouTube Facebook Instagram Twitter WhatsApp

Oil prices fall to $44.05 amid uncertainty over Saudi Arabia minister’s exit


Oil-prices• Canada’s wildfire shuts-in 645,000bpd
International crude oil prices dropped to $44.05 yesterday amid market uncertainty generated by the removal of Saudi Arabia’s long-serving oil minister, Ali al-Naimi.

The global cocktail of factors helped push Brent, the international crude benchmark, down 0.61 per cent to $44.05 for July cargoes and its U.S. counterpart West Texas Intermediate up 0.2 per cent to $44.76 for June cargoes.

Though some analysts expected a Saudi Arabian reshuffle at some point, the timing of the appointment of Khalid al-Falih, chairman of state-owned oil company Saudi Aramco, took the market by surprise.Analysts were split over what the reshuffle will mean for the oil price in the long term.

To some, the removal of Naimi is a reaffirmation that 31-year-old Deputy Crown Prince Mohammed bin Salman is the person driving Saudi Arabia’s energy policy. Some officials at the Organisation of the Petroleum Exporting Countries said that could mean a deeper politicisation of oil-production strategy as the kingdom looks to outmanoeuvre its rival Iran, which is trying to come back from years of Western sanctions with a surge in output. That could make coordinating oil-production curbs harder.

An attempt to curb global output was foiled last month when Saudi Arabia refused to take part because geopolitical rival Iran wasn’t involved.
“Iran has always been a big competitor for Saudi, even during sanctions as Iran was still exporting over one million barrels a day to Asian countries,” said Amrita Sen, chief oil analyst at Energy Aspects.

Still, U.S. bank Morgan Stanley said in a note that Iran’s success in ramping up post-sanctions production may remove some of its reluctance to join a price freeze. Oil output from the Islamic Republic could soon hit 4.2 million barrels a day which would represent a rise of 800,000 barrels a day since November, the bank said.

The market reaction to news out of Canada and the Chinese import data was clearer cut, with both being seen as a positive for market prices.
The wildfire in the heart of Canada’s oil-producing region continues to rage and is taking at least 645,000 barrels a day of supply out of the market, according to calculations made from public announcements from the producers in the area.

The total figure could be as high as one million barrels a day because two of the largest operators have yet to specify exactly how much of their production has been affected. The uncertainty surrounding Canada is likely to be one of the main factors driving trading this week.

“This production isn’t gone for good, yet when fires are controlled, restarting production will take several more weeks, even without damage,” Morgan Stanley said in its research note.

Meanwhile, China’s crude imports rose 7.6 per cent year-over-year last month, the third straight month that crude imports surpassed 30 million tons according to government data. On a daily basis, China shipped in 7.9 million barrels a day in April.

Receive News Alerts on Whatsapp: +2348136370421

No comments yet