New Saudi energy minister pledges to keep on pumping oil as N. Sea crude price slops around $45-barrel

leaking oil barrelSaudi Arabia has appointed a new minister for energy to replace 81-year old Ali al-Naimi, who has overseen the desert kingdom’s oil policy for the past 20 years.

His successor is Khalid al-Falih, 56, chairman – and former chief executive – of Saudi Aramco.

Oil industry observers said that the appointment of al-Falih does not signal a change in oil policy. 

Indeed, Saudi oil policy is now being closely directed by Deputy Crown Prince Mohammed bin Salman, who is second in line to the Saudi throne. Al-Falih is among the inner circle of officials advising Prince Mohammed.

And in his first public statement as minister, Al-Falih has affirmed that Saudi Arabia intends to continue supplying current and increasing volumes of oil to markets.

Increased output will inevitably reduce the kingdom’s spare production capacity unless that is also increased, while also acting as a drag on any possible recovery in global crude oil prices.

He said Saudi Arabia was “committed to meeting existing and additional hydrocarbons demand from our expanding global customer base, backed by our current maximum sustainable capacity.” Saudi officials say the kingdom currently has the capacity to produce about 12.5 MMb/d of oil, well above production of about 10.2 MMb/d in recent months. Saudi officials have been explicit about the country’s oil policy.

Among Al-Falih’s major tasks will be preparing Aramco for a partial privatisation that is a keystone of the kingdom’s new strategy to reduce reliance on oil revenues. A growth narrative could increase the company’s attractiveness to investors.

N. Sea benchmark Brent Crude oil futures closed up $1.60 at $45.23-barrel in London.

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