You can’t talk Texas oil without talking about the competition. In that regard, the eyes of Texas are upon Saudi Arabia right now. Over the weekend the Saudis ended the 20-year tenure of oil minister Ali al-Naimi. Al-Naimi is credited as a pillar in the development of the Organization of Petroleum Exporting Countries, or OPEC. Now, energy investors and analysts alike are waiting to see how this change could affect an already tumultuous oil economy.
Matt Smith, director of commodity research at ClipperData, says that timing is the most surprising aspect of al-Naimi’s replacement.
“His removal, let’s say, from his role has really come as quite a surprise to the market,” Smith says. “He’s over 80 and so it’s no surprise that he’s moving on, but the timing has been exceedingly strange for that. And it’s really a very tumultuous time in terms of the Saudi Arabian oil market.”
Replacing al-Naimi appears to be political more than anything, since Saudi Arabia has announced plans to invest in other aspects of their economy, an effort led by deputy crown prince Mohammad bin Salman Al Saud.
“This decision to remove al-Naimi seems to be more symbolic effort as opposed to anything tactical,” he says.
But even with a regime change, Saudi Arabia will most likely maintain its stance of high production to maintain their market share. So competition with them will remain.
“Saudi Arabia is not changing its tack in terms of targeting market share,” he says. “And because of that we are likely to see prices of oil remain relatively in check going forward as Saudi Arabia continues to flood the market.”
Web post prepared by Alexandra Hart.