Crude rises a dollar following death of Saudi Arabia’s King

SINGAPORE (ICIS)–Crude futures strengthened on Friday after the death of Saudi Arabia’s King Abdullah bin Abdulaziz rising by more than a dollar at one stage, but upside was limited by expectations that the oil policy of the OPEC heavyweight will not change at least in the short term.

At 06:44 GMT, March Brent crude on London’s ICE futures exchange was trading at $49.27/bbl, up by $0.75/bbl from the previous close. Earlier, the North Sea benchmark rose to a session high of $49.80/bbl, up by $1.28/bbl.

March NYMEX light sweet crude futures (WTI) were trading at $47.01/bbl, up by $0.70/bbl from the previous close. Earlier, the US benchmark rose to a high of $47.76/bbl, up $1.45/bbl.

Saudi Arabia is the leading member of OPEC and the organisation’s largest producer with an output in December 2014 of some 9.62m bbl/day, according to the latest report from the International Energy Agency (IEA).

Saudi Arabia has been the driving force in the OPEC’s decision not to lower production in the face of the recent decline in oil prices.

King Salman who succeeds King Abdullah is thought likely to continue the present policy of maintaining production levels.

Until the November OPEC decision not to cut output, Saudi Arabia had acted a swing producer raising and lowering production in response to price movements, pressure from other OPEC members and from consuming nations. 

However, Saudi Arabia is now focussed on protecting its market share amid competition from US shale oil producers.

Unlike other members such as Venezuela and Libya, Saudi Arabia has the financial resources to withstand lower oil prices.

Prices had declined in the previous session after the Euro fell to an 11 year low against the US dollar amid the announcement by the ECB of €60bn per month quantitative easing programme starting in March and running to at least September 2016.

Further downside pressure followed on Thursday after the US government’s  Energy Information Administration (EIA) revealed a massive 10.1m bbl rise in US crude stocks.