With declining oil revenues since mid-2014, Saudi Arabia had a $100 billion budget deficit a year ago and projects another $87 billion shortfall for 2016. The other is that the prince is the champion of Saudi Arabia’s Vision 2030 program, which aims to wean the country off its dependence on oil production by selling off part of Saudi Aramco and using the money to invest in other, non-oil assets. “It depends how aggressive the Saudis are in pursuing high production for extended periods and how willing they are to accept lower prices for longer”.
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Saudi Oil Minister Ali al-Naimi speaks during a press conference following a meeting with Sudanese Oil Minister in Khartoum on May 4, 2016.
The new Energy, Industry and Mineral Resources Ministry was announced on Saturday as part of a major reshuffle of ministers by Saudi Arabia’s King Salman.
Oil prices jumped on Monday as a huge wildfire in Canada’s oil sand region knocked out over a million barrels in daily production capacity, contributing to a significant tightening of markets over the past weeks. “We remain committed to maintaining our role in worldwide energy markets and strengthening our position as the world’s most reliable supplier of energy”, Khalid al-Falih said yesterday.
The change is unlikely to mean a shift in Saudi oil policy, which is being crafted to a large degree by Deputy Crown Prince Mohammed bin Salman, who oversees the kingdom’s energy and economic policies, and involves building consensus among top royals based on the advice of senior technocrats.
By last month, with prices hovering just above $30 a barrel-much lower than OPEC members had either expected or could comfortably tolerate-al-Naimi had started to show signs of softening. “We are seeing a global increase in demand” for oil, which he estimated would be about 1.2 million bpd this year.
His observation came amid talks to agree on an output freeze, which arch-rival Iran had declined to join until after it has increased its own output level by 1 million bpd, to the 4 million bpd it enjoyed before nuclear-related sanctions were imposed in 2012.
Swann explained that for oil markets, communication has been key – and analysts have been able to react knowingly to any headlines with Naimi’s name included.
“Al Falih will probably be more direct with its Opec partners, like Venezuela and Iran”, Fabio Scacciavillani, chief economist of the Oman Investment Fund, said in an interview Sunday in Dubai.
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“In some ways, (Mohammad bin Salman)’s oil policy appears to be an extension of his provocative foreign policy efforts to roll back Iranian influence (including the costly Saudi military intervention in Yemen)”.
