Oil jumps as Saudi king's death feeds market uncertainty
Abdullah died early on Friday and his brother Salman became king, the royal court in the world’s top oil exporter and birthplace of Islam said in a statement carried by state television.
U.S. benchmark WTI crude futures rose more than 2 percent to a high of $47.76 a barrel, but had eased back to $47.09 by 0135 GMT.
International Brent crude futures rose to a high of $49.80 a barrel shortly after opening before easing back to $49.35 a barrel by 0152 GMT, up 1.71 percent.
“The fear of the unknown is going to be supportive to crude oilprices,” said John Kilduff, partner, Again Capital LLC in New York.
“King Abdullah was the architect of the current strategy to keep production high and force out smaller players instead of cutting,” he added.
Kilduff also said that the new king was known as a defender of Saudi Arabia’s interests and that the market would expect him to keep production high.
The Saudi King’s death comes amid some of the biggest shifts in oil markets in decades.
Oil prices have more than halved since peaking in June last year as soaring supplies clash with cooling demand, due to economic slowdown in Europe and Asia as well as improvements in energy efficiency, made during times of high prices.
Booming U.S. shale production has turned the United States from the world’s biggest oil importer into the biggest producer, producing more than 9 million barrel per day.
To combat soaring output and falling prices, many oil exporters, such as Venezuela, wanted the 13-member Organization of the Petroleum Exporting Countries (OPEC) to cut output in order to support prices and revenues.
Yet, led by Saudi Arabia, OPEC announced last November it was keeping output steady at 30 million barrels per day.
Brent, which had already fallen to $77 per barrel by the time of the OPEC meeting, dropped another quarter over the next month as the market digested the fact OPEC would not come to the rescue.
OPEC’s decision not to act, led by Saudi Arabia, was aimed at defending market share against U.S. shale producers as well as other non-OPEC exporters such as Brazil or Russia. (Reuters)