Death of Saudi King Unsettles Oil Market, Prices Rise

Riyad, Jan. 23 (NsNewsWire) — Oil prices rose on news of the death of Saudi Arabia’s powerful King Abdullah, but the increase is likely to be short-lived without a cut in the kingdom’s immense crude production.

The benchmark U.S. crude futures contract was up 71 cents to $47.02 a barrel at 0725 GMT on Friday. Brent crude, an international benchmark, was up 92 cents to $49.42 a barrel, reports AP.

The small rise reflects added uncertainty about Saudi oil policy because the country’s new absolute monarch, Abdullah’s 79-year-old half brother Prince Salman, is in poor health.

“It is necessary to stay watchful about Saudi politics,” said Oh Jeong-seok, head of commodity markets at state-run Korea Center for International Finance. “As he is nearly 80 years old and his health isn’t in good condition, that itself is uncertain. The price of oil goes up when there is an uncertainty.”

Still, the months-long slump in oil prices that is providing a boost to the stumbling world economy is unlikely to reverse unless Saudi Arabia cuts production or world demand starts strengthening again. Some analysts think Saudi production won’t be lowered anytime soon because the country wants to maintain its market share.

Oil prices have plummeted nearly 60 percent since June. Global supplies have soared, thanks partly to a boom in U.S. shale oil production, at a time when growth in global demand for crude has slowed.

Saudi Arabia occupies a unique position in world oil markets. It is one of the world’s biggest producers, it has the strongest voice within OPEC as its largest exporter, and it is the only oil producer that has the ability to significantly increase or decrease output in response to changing market conditions.