Friday, January 23, 2015

Expect No Change In Oil Policy With The Passing Of Abdullah Ibn Abdulaziz Ibn Abdul Rahman al Sa'ud

Abdullah ibn Abdulaziz ibn Abdul Rahman al Sa'ud, king of Saudi Arabia from 2005 until some hours ago, has died at the age of 90. He has been succeeded already by the Crown Prince, Salman ibn Abdulaziz ibn Abdul Rahman al Sa'ud, age 79, last of the powerful Sudairi Seven I(one of whom, Fahd, preceded Abdullah as king), who served as Governor of Riyadh province from 1963 until 2011, when he became Minister of Defense on the death of then Crown Prince Sultan, another of the Sudairi Seven, the sons of the favorite wife (and first cousin) of their father, the founder of modern Saudi Arabia, Abdulaziz ibn Abdul Rahman ibn Faisal al Sa'ud, known widely as "Ibn Saud."

Salman has been replaced as Crown Prince by the youngest of the living 43 sons  of Abdulaziz, Moqrin, age 69, who has served as a provincial governor, director of Saudi intelligence, and most recently as a deputy minister of  defense, whose mother was from Yemen, a circumstance long thought to damage his chances for the succession.  He is in far better health than the new king.  There are two other sons left, Talal, born in 1931 and Ahmed born in1940, but Moqrin will almost certainly outlive both of them to be the last of the sons of the nation's founder.  What this means is that when he finally dies, which could be a few decades from now, the nation will finally fully face the long simmering succession issue of which line of sons of Abdulaziz will become the new royal family line, with this possibly being faced sooner when Salman dies and a new crown prince must be named.

While Abdullah has often been described as a reformer or moderate within the family, both Salman and Moqrin probably deserve this label more than he did. In fact, prior to his accession, he was viewed as among the more conservative members of the Saudi royal family, very strict religiously and close in friendship with the Bedouin tribesmen.  He had served since 1962 as the Commander of the Saudi Arabian National Guard (SANG), the tribally based military not under the Minister of Defense.  In 1979 when ultra-fundamentalists took control of the Grand Mosque in Mecca, the conventional military was unable to dislodge them, but SANG eventually did.  Its HQ was long on the personal palace grounds of Abdullah, and one of his sons succeeded him as its commander in 2010.  His supposed reformism (allowing women to vote and participate in the Olympics and attend the university named for him King Abdullah University of Science and Technology, KAUST), reflected a sort of "Nixon goes to China" syndrome in that he had such a rep for conservatism and religiosity that he could get away with it, although he never did get around to allowing women to drive.

While will oil policy not change?  One of the new king's sons, Abdulaziz ibn Salman ibn Abdulaziz al Sa'ud is the deputy minister of oil under current minister al Naimi.  Without question he has been part of the targeting of the price of oil to be in its current price range of $45 to $50 per barrel that appears to be being enforced by the Saudis and is consistent with what they expected when they announced their planned budget in November.  Salman has a reputation as getting along with the many factions of the royal family,after having built the capital city, Riyadh, into its current magnificence.  He is certainly in agreement with the current policy, indeed, is rumored to have been effectively in charge of the Saudi government recently with the failing of his older half brother.  The new policy of a target oil price between $45 and $50 per barrel most certainly had and has his approval.

Barkley Rosser


Larry Signor said...

Barkley, This obviously implies that your 45-50.00/bbl estimation still stands as a bottom. Good work. The hysteria over additional price bottoming does seem overblown. said...

Thanks, Larry. As it is, during this period of transition I think the Saudis are going to be putting more effort than maybe at any time to make sure the price is stable. Funny thing, the immediate reaction to Abdullah's death was a price jump, the usual reaction to "Middle Eastern uncertainty," which was then undone the other day, while some other commentators have been forecasting a massive decline.

What is really rather amazing is that there remains a gap between the West Texas price and the Brent price, but both are well in the middle of the $45-50 range, both in the $47-48 zone. That is about as centered on what the Saudis appear to want as one can get.