Published: Thu, September 12, 2019
Economy | By

Current Saudi Oil Minister Introduces Cuts Along With Leap

Current Saudi Oil Minister Introduces Cuts Along With Leap

Until this trade war finds a resolution, prices will have a pretty limited space for growth, whatever OPEC+ decides to do.

To prepare for an initial public offering, Aramco replaced al-Falih as board chairman last week with finance-minded Yasir al-Rumayyan, distancing the company from the energy ministry.

Separately, the U.S. Energy Information Administration said domestic gasoline stocks decreased less than expected last week while crude stocks fell to the lowest in almost a year.

"Prince Abdulaziz is very experienced and has served in the energy industry for decades", Giovanni Staunovo, an analyst at UBS Group AG in Zurich, told Bloomberg News.

On Sunday he said the pillars of Saudi Arabia's policy would not change and a global deal to cut oil production by 1.2 million barrels per day would be maintained. Last week, the API reported an unexpected inventory build, which was rejected by the Energy Information Administration a day later but temporarily added pressure to prices.

Crude has lurked in the low $60s for most of the summer as escalating tensions between the USA and China and increasing fears of a looming recession prompted downgrades to oil-demand forecasts.

Prices on Monday were also supported by a rise in oil imports in China in August, with shipments to the world's biggest importer up 3 percent from July and almost 10 percent higher in the first eight months of 2019 from a year earlier.

"Gasoline stocks fell by 682,000 barrels, slightly less than expected, whilst distillate stocks increased unexpectedly by 2.7 million barrels", said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany. The most recent previous high was reached July 31.


He added that the so-called OPEC+ alliance between OPEC and non-member countries including Russian Federation, a partnership he helped cement, was staying for the long term.

It was unclear whether there would be a change in policy under Prince Abdulaziz, who joined the oil ministry in the 1980s and has held a variety of senior roles.

The prince's unparalleled diplomatic network may help soothe relationships frayed by Al-Falih, who often seemed impatient with OPEC members unable or unwilling to contribute meaningful oil production cuts.

In this view, higher oil prices would translate into a higher valuation for the company, which the country's de facto ruler, Crown Prince Mohammed bin Salman, has said is worth $2 trillion.

The IPO is a centerpiece of Saudi Arabia's economic transformation drive to attract foreign investment and diversify away from oil.

Henderson says that includes megaprojects such as building a $500 billion futuristic city, called Neom, in a remote northwestern corner of Saudi Arabia.

In the United States, drilling companies cut the number of operating oil rigs for a third week in a row last week.

For Crown Prince Mohammed bin Salman, the Aramco IPO forms the cornerstone of a reform programme that aims to wean the Saudi economy off its reliance on fossil fuels.

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