World

Death of Saudi king raises uncertainty over oil prices, production levels

Oil prices jumped in early Asian trading on Friday as news of the death of Saudi Arabia's King Abdullah added to uncertainty in energy markets already facing some of the biggest shifts in decades.

'The fear of the unknown is going to be supportive to crude oil prices'

Under King Abdullah, Saudi Arabia decided not to cutback oil production as prices declined. (Dylan Martinez/Reuters)

Oil prices jumped in early Asian trading on Friday as news of the death of Saudi Arabia's King Abdullah added to uncertainty in energy markets already facing some of the biggest shifts in decades.

Abdullah died early on Friday and his brother Salman became king, the royal court in the world's top oil exporter and birthplace of Islam said in a statement carried by state television.

U.S. benchmark WTI crude futures rose more than two per cent to a high of $47.76 US a barrel in early Asian trading. International benchmark Brent futures opened up almost 1.5 per cent higher at $49.10 per barrel at 0100 GMT.

The Saudi king's death comes amid some of the biggest shifts in oil markets in decades.

"The fear of the unknown is going to be supportive to crude oil prices," said John Kilduff, partner, Again Capital LLC in New York.

"King Abdullah was the architect of the current strategy to keep production high and force out smaller players instead of cutting," he added.

Oil prices have more than halved since peaking in June last year as soaring supplies clash with slowing demand.

Booming U.S. shale production has turned the United States from the world's biggest oil importer into the biggest producer, producing more than nine million barrels per day.

To combat soaring output and falling prices, many oil exporters, such as Venezuela, wanted the 13-member Organization of the Petroleum Exporting Countries (OPEC) to cut output in order to support prices and revenues.

Yet, led by Saudi Arabia, OPEC announced last November it was keeping output steady at 30 million barrels per day.

Brent, which had already fallen to $77 per barrel by the time of the OPEC meeting, dropped another quarter over the next month as the market digested the fact OPEC would not come to the rescue.

OPEC's decision not to act, led by Saudi Arabia, was aimed at defending market share against U.S. shale producers as well as other non-OPEC exporters such as Brazil or Russia.

Comments

To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.

Become a CBC Member

Join the conversationCreate account

Already have an account?

now