As market welcomes new Saudi oil minister, analyst touts Prince Abdulaziz as ‘master’ of OPEC politics

Saudi Arabia appointed a new energy minister over the weekend, and the oil market appears to have welcomed Prince Abdulaziz bin Salman with open arms, touting King Salman’s son as an energy ministry veteran who likely remains committed to production cuts.

Prince Abdulaziz replaces Khalid al-Falih, who held the post for about three years and was removed last week as chairman of Saudi Arabia’s state-owned oil giant, Saudi Aramco. The country has never placed a member of the royal family in charge of the energy ministry before, according to The Wall Street Journal.

The replacement of al-Falih comes ahead of Saudi Aramco’s initial public offering. Plans for the IPO were put on hold last year, but the oil company has revived the initiative, which would create the world’s largest publicly-traded company, as soon as early next year, Barron’s reported in early August, citing people familiar with the discussions.

“The change in the energy ministry was primarily done ahead of the Aramco IPO so as to have a member of the royal family in charge when the world’s largest oil company goes public,” said Marshall Steeves, energy markets analyst at IHS Markit.

Oil prices got a boost Monday following the weekend news, with global crude benchmark Brent for November delivery BRNX19, +1.95% up $1.14, or 1.9%, at $62.68 a barrel on ICE Futures Europe. October West Texas Intermediate crude CLV19, +2.44% traded at $57.70 a barrel on the New York Mercantile Exchange, up $1.18, or 2.1%.

“When it comes to OPEC politics, [Prince Abdulaziz] is a master at that,” independent energy expert Anas Alhajji told MarketWatch.

Over the weekend, Alhajii tweeted that the new energy minister “comes to office with unprecedented experience, knowledge of oil market economics/politics. He attended more OPEC meetings than any current OPEC official.”

Alhajji also pointed out that the Prince has “participated in the making of the Saudi oil policy since the 1980s. He is the institutional memory of the Saudi oil policy and OPEC.”

On Monday, Prince Abdulaziz said Saudi Arabia’s policy would not change and the Organization of the Petroleum Exporting Countries’ deal with other major producers, including Russia, to cut production by 1.2 million barrels a day would continue, according to Reuters. He also said the alliance between OPEC and the non-member oil producers would stay for the long term.

“No major changes are likely,” IHS Markit’s Steeves said. Prince Abdulaziz “already told the press the OPEC+ production cuts are likely to continue and this affirmation helped firm up the market” into Monday trading.

And “since this change doesn’t represent a major policy change, the implications for the market are likely minor aside from confirmation that the kingdom remains committed to the OPEC+ alliance and to the cuts,” said Steeves.

Still, the move comes ahead of a meeting of major oil producers, which is expected to take place this week on the sidelines of the World Energy Congress.

The change in leadership may offer a “signal that we could see a possible shift in strategy at the September 12th OPEC+ strategy meeting in Abu Dhabi,” said Edward Moya, senior market analyst at Oanda, in an email update.

Prince Abdulaziz is half-brother to the Crown Prince Mohammed bin Salman, which Moya pointed out as suggesting there could be more pressure from the Saudis for OPEC+ to stabilize prices with further cuts.

Aside from oil, the appointment of a new energy minister is “about vision 2030 and all the power generation [Saudi Arabia] needs to metalize,” said Alhajji, referring to the Saudi plan to reduce the country’s dependence on oil and diversity the economy.

“The Saudi oil policy is not expected to change, but he is the energy minister,” Alhajji said of Prince Abdulaziz’s appointment. “His legacy could be in the power sector where Saudi Arabia is focusing on solar, wind, and nuclear,” Alhajji told MarketWatch. “Energy efficiency programs will get a boost under his leadership.”

MarketWatch

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