The announcement, which is likely to result in another dip in oil prices as traders play on the negative news, though not unexpected, comes as Aramco talks about global expansion and moves towards a partial IPO.
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The appointment of a new Saudi oil minister “has made the June OPEC meeting less clear to investors, as the representative of the world’s most powerful producer of oil has mentioned that keeping output high is the best strategy for the kingdom”, Yang noted. But Saudi Arabia refused to agree to a deal without Iran’s participation.
With job creation and economic reform the top priorities, his challenge will be cutting through the country’s tangled bureaucracy to make government more coherent and efficient.
The kingdom is leading Organization of Petroleum Exporting Countries members in a battle for market share against higher-cost producers including USA shale drillers. Al-Falih will head a a revamped “mega ministry”, as Business Insider puts it, one with responsibility for oil and gas extraction, power generation and distribution, and mining and industrial development, while continuing to run Aramco and its long-rumored IPO. He replaces long-time oil minister, Ali al-Naimi, who was sacked from the position he held since 1995.
Deputy crown prince Mohammed bin Salman estimates the company is worth more than $2 trillion.
Giving a leg up to your competitors doesn’t seem to fit neatly with the whole recent theme of Saudi Arabia’s oil strategy, which has been to maximise output and market share and worry less about the price. He said demand was trending higher in other places as well, such as India and the US, and that the company expected demand to rise by 1.2 million barrels a day this year.
The new approach “will help the kingdom to better meet domestic and global energy demand”, while integrating and diversifying energy and other resources, he said. Some referred to him as the Alan Greenspan of the oil market, unafraid to slow or ramp up oil production when he believed it necessary to maintain a healthy oil commodities market.
The world’s biggest oil company looks set to join the London Stock Exchange in the biggest share listing of all time.
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News that Aramco is going to increase output capacity further may impact crude oil prices, which have been making a jagged, tenuous recovery since falling below $30 a barrel in January.
