Oil prices surged today following the death of Saudi Arabia’s King Abdullah, with investors watching to see if the country will change its policy of maintaining high production in the face of plunging prices and a global supply glut.
US benchmark West Texas Intermediate (WTI) for March delivery soared as much as 3.1 per cent in New York after the Saudi royal court announced the death.
In early morning Asian trade, the contract was up USD 73 cents, or 1.58 per cent, at USD 47.04 a barrel.
Brent crude for March jumped USD 1.09, or 2.25 per cent, to USD 49.61.
The surge in prices comes after months of steep falls caused by weak global demand, an oversupply of the black gold and a refusal by the OPEC cartel, of which Saudi Arabia is a key member, to cut down on output.
"The market is probably uncertain over what the new king would do about this over supply issue," said Daniel Ang, an investment analyst with Phillip Futures in Singapore.
"The market was just pricing this uncertainty," he told AFP.
King Abdullah bin Abdulaziz died today and was replaced by Crown Prince Salman, the royal court said in a statement.
Analysts said focus will turn to whether Salman, 79, keeps Ali al-Naimi as the country’s oil minister since 1995.
"The Saudi leadership has already taken the tough decision to live with lower oil prices," Florence Eid-Oakden, chief economist at London-based consultants Arabia Monitor, said by phone.
Saudi is the main producer in the Organisation of the Petroleum Exporting Countries (OPEC) whose decision in late November not to cut production levels despite a supply glut accelerated the fall in oil prices.
OPEC’s 12 members, which supply about 40 per cent of the world’s oil, kept their combined output target at 30 million barrels a day during a November 27 meeting.
Saudi Arabia has rejected calls from some members to slash output, preferring instead to lower prices in a bid to gain market share.
Oil prices have lost more than half their value since June, when they were sitting at more than USD 100 a barrel.
The late monarch’s half brother Moqren was named crown prince, according to the royal court statement.