KSA: New Saudi energy minister vows to achieve oil market balance

Saudi ousts al-Falih names veteran prince as energy minister

Cartel kingpin Saudi Arabia, which pumps around a third of OPEC's oil, has resorted to massive production cuts to lift prices since the market crash in mid-2014. Until this trade war finds a resolution, prices will have a pretty limited space for growth, whatever OPEC+ decides to do.

Prince Abdulaziz, who is the first prince from the ruling Al Saud family to lead the country's energy ministry, said he did not want to be "too presumptuous" by discussing what he thinks the group of major oil producers should do heading into Thursday's OPEC meeting.

The former energy minister, Khalid al-Falif, began to fall from favor more than a week ago when he replaced as chairman of Saudi Aramco with a Yasir al-Rumayyan. The surge in USA shale production over the last five year has put Saudi Arabia and its allies on the back foot, forced to concede market share to shore up prices. "If anything, maybe more of a push in the direction of getting inventories down and getting the market into shape for the (Aramco) IPO", Robert Ryan, Chief Energy Strategist at BCA research, told Reuters. Despite the agreement, Saudi Arabia boosted its input by 1 million bpd that year, which pushed down on oil prices. Oil demand drops in the US have not happened and talk of falling global demand looks to be more overstated than understated. He expressed concern in January at an energy forum in Abu Dhabi over the "range of volatility" in oil prices seen over the past two to three years.

"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.

In the most recent period, foreign reserves fell by a total of nearly $14 billion in June and July, as lower prices hit export earnings, after increasing by $32 billion over the previous 20 months.

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Prince Abdulaziz is not new to the oil game. "His royal highness Prince Abdulaziz bin Salman is appointed minister of energy". Markets reacted positively to this announcement on hopes that production cuts could be extended, particularly following comments from the Prince that the OPEC+ alliance will be in place for the long term.

Opec oil output rose in August for the first month this year as higher supply from Iraq and Nigeria outweighed restraint by Saudi Arabia and losses caused by USA sanctions on Iran, a survey found. Opec's share of the cut, which now runs to March 2020, is 800,000 bpd, delivered by 11 members and exempting Iran, Libya and Venezuela.

But the style of Saudi Arabia's oil-market management is likely to be different.

In order for U.S. companies to compete for Saudi Arabia's project, Riyadh would normally need to sign an accord on the peaceful use of nuclear technology with Washington, under the United States Atomic Energy Act.

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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