Saudi Arabia will probably keep producing crude at near-record levels under its newly appointed oil minister, Khalid Al-Falih, as the world’s largest exporter sticks with his predecessor’s policy of defending market share against higher-cost shale.
Al-Falih, also chairman of the state producer Saudi Arabian Oil Co., said on his first day in office on Sunday that he will maintain the kingdom’s oil policy. His predecessor, Ali al-Naimi, had been leading a policy prioritizing sales over prices since 2014, driving some higher-cost producers, including U.S. shale drillers, off the market. In so doing, Saudi Arabia boosted output, adding to a supply glut. The strategy is showing signs of succeeding this year, with prices gaining more than 60 percent since tumbling to a 12-year low in January.
Saudi Arabia could exceed its record output of more than 10.5 million daily barrels if it pumps more to meet a seasonal surge in domestic demand during the summer months, analysts from Emirates NBD PJSC and Qamar Energy said. The country, with the world’s second-largest oil reserves, pumped 10.27 million barrels a day in April.
“If the market considers the appointment as signaling more of the same for Saudi policy, that could allow prices to continue following their gradual trend upward,” Edward Bell, commodities analyst at Emirates NBD, said Sunday by phone from the Dubai-based bank. Continuity in Saudi policy may be offset by the immediate impact of Canadian forest fires forcing about 1 million barrels of daily crude production offline, he said.
Saudi Arabia appointed Al-Falih on Saturday to head the newly expanded Ministry of Energy, Industry and Mineral Resources. He replaces al-Naimi, a 20-year veteran in the post. Al-Falih takes over the ministry responsible for most of the nation’s income as the biggest producer and de facto leader of OPEC embarks on an economic overhaul designed to make it less reliant on petroleum.