Nymex crude futures ended up more than $1 and above $61 after hitting an all-time record on Monday following the death of Saudi Arabia’s King Fahd.
Speculators questioned the implications for Saudi oil policy after the death of the leader of the world’s top exporter.
“None” was the answer given by economists, oil market strategists and politicians, however.
They pointed out that the transfer of power had happened many years before, following King Fahd’s stroke in 1995.
Saudi authorities were quick to officially name Crown Prince Abdullah as King Fahd’s successor, a role he has unofficially carried out since the King’s stroke.
This was followed by a chorus of comments intended to soothe market nerves.
Bijan Zanganeh, oil minister for Iran, said: “Because Saudi Arabia’s policy was conducted by Prince Abdullah, naturally there should be no change in the country’s policy. The shock in the market because of the death of King Fahd will be temporary.” This was echoed by Prince Turki al-Faisal, the Saudi ambassador to London, who said there would be no change in policy – including that of oil production and supply.
Reassuring comments aside, by the close in New York, front-month Nymex West Texas Intermediate was up $1.00 at $61.57 a barrel, creeping back towards the nominal all-time high of $62.10 set on July 7.
September Brent crude on London’s International Petroleum Exchange ended $1.07 higher at $60.44 a barrel, within sight of its high of $60.70, also set on July 7.
“Some bullish short-term players may try to add momentum, however, as the oil markets digest this development in the coming days . . . there will not be any lasting price impact,” said Mike Wittner, head of energy research at Calyon.
King Fahd’s death came just as the market was experiencing supply concerns of a different kind as a recent spate of production problems combined to rattle nerves.
These included, last week, a fire at a Murphy Oil kerosene unit in Louisiana, a production slowdown at Valero’s St Charles and Corpus Christi refineries, and an explosion at an Indian crude platform.
BP said at the weekend that it was shutting a petrol-producing unit at its Texas City refinery for maintenance. It was hit by a fire on Thursday, but the company did not say if the closure was related to the fire.
“It is hard to make the case for a substantial retreat in energy prices this week given the rash of refinery outages we have been seeing and the tropical storm watches that are out there,” said Edward Meir, energy strategist at Man Financial. “The Saudi news should also keep markets on edge, particularly as world leaders descend on the tense Saudi capital for the funeral.”
