News that Saudi King Abdullah bin Abdulaziz Al Saud passed away sent oil prices sharply higher on Friday, but analysts dismissed the move as a knee jerk reaction, noting the recent trend remains intact.
“It’s not an extraordinary move in oil prices, given the recent volatility and turmoil in the oil markets,” said Michael Levi, senior fellow for energy and the environment at the Council on Foreign Relations (CFR). “Oil prices have dropped 60 percent over the past six months – compared to that, [today’s move] is not earth shattering,” he said.
Nymex WTI crude oil futures rose as much as 2.5 percent to $47.76 after the news broke but trended back down to $47.25 by mid-day in Asia. Brent crude also rose over 2.5 percent to a high of $49.80 shortly after opening and was recently trading at $49.55.
“It’s just the markets pricing in any potential uncertainty over the succession. Prices will settle back down: current levels may hold for a couple of weeks, or whenever the new king comes out and confirms the current policy will be continued,” said Phillip Futures investment analyst Daniel Ang.
“[And] the succession in Saudi Arabia itself will be about continuity – in Saudi Arabia, the king makes policy decisions in consensus with other royal family members,” he said.
Saudi Arabia led OPEC’s decision to maintain its production levels on November, triggering a further collapse in oil prices. Oil prices have plunged more than 50 percent since mid-2014, with Brent at $48.52 a barrel at Thursday’s close, and Nymex crude at $46.31.
Read More from CNBC:
Icahn: Oil will go lower, ‘tremendous opportunity’
Why the oil slump is not just a blip
Still, the real succession is unclear, according to CFR’s Levy. Salman is 79 and no one has any good visibility on how the handover of power to the next generation is going to play out, he said. Salman on Friday appointed his half-brother Muqrin as his crown prince and heir.
Bigger, non-Saudi risks lurking
Analysts remain divided on where prices are headed…
Read the remainder of this article on CNBC’s website.
