The king is dead, long live the king: how Abdullah's death will affect oil

In the night from Thursday to Friday, the 90-year-old King Abdullah of Saudi Arabia, the ruler of the most powerful oil-producing nation, passed away.
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In the last months of his life, the kingdom suddenly gone from years of practice support oil prices and actually released them into free-fall. The news of the death of Abdullah briefly led the market into confusion. But the transfer of power to the heir held no surprises, and wait for major changes in oil policy Riyadh's not worth it, experts say.

On the night of Friday, January 23 the royal court of Saudi Arabia in the television broadcast has announced the death of 90-year-old King Abdullah of Saudi Arabia. the deceased was succeeded by his younger brother - 79-year-old Crown Prince Salman. The death of the aged ruler, recently suffered a variety of illnesses, can not be called unexpected, but the market still reacted to the news of a surge in volatility. Futures for WTI US crude on Friday rose in price to a maximum of 3,1%, Brent quotations - on 2,6%, Bloomberg said.

The death of the sole ruler of the country, the largest exporter in the world oil market is perceived as a factor that creates uncertainty. But the kingdom did their best to smooth the transition of power to the trackyuschemu governor. The new king, as planned on the basis of the tradition of succession, became Crown Prince Salman. Moreover, Salman immediately approved the following succeeded his younger brother - 69-year-old Prince muqrin like that and wanted late Abdullah. Thus, the succession system has worked well, and the order of the transfer of power is defined by at least the next few years.

Now the market is only interested in one question: whether the king change will lead to changes in the oil kingdom's politics? Most experts believe that major changes will not happen.

King Abdullah considered the architect of the current strategy of maintaining high levels of production, said partner management company Again Capital John Kilduff (according to Reuters quoted). There is no reason to expect that after the death of Abdullah, the kingdom's position will change, said The New York Times, former vice president of the Saudi oil monopoly Saudi Aramco Sadad al-Husseini. As a former insider, he knows that the policy of Riyadh in the field of energy is based on consensus of the ruling elitecourt experts.

King Salman will maintain the policy of his predecessor, and Oil Minister Ali al-Nuaimi, occupying this post since 1995, is still in office, reported the state news agency Saudi Press Agency. After that Brent crude oil retreated from daily highs, recorded Bloomberg. As of 20:30 Moscow time futures for Brent rose, but not so much - only by 0.7% (to $ 48.9 / bbl.). In November 2014, Saudi Arabia insisted that OPEC did not change oil production quotas, then the oil price has fallen by about 36%. In the old days, the kingdom would cut oil supplies to the market to support prices, but this time do otherwise.

The course of self-defense

In November, when oil quotations were falling for several months, despite the OPEC's usual logic of "stabilizing producer" has decided not to cut the official quota of oil production and left it at the level of 30 million barrels. / Day. Observers interpreted this as a consequence of the shale boom in North America: production there will still increase, and OPEC and Saudi Arabia the leader may lose even more market upLiu, if they reduce the supply. "If we are to reduce the quota [in November], we would have to reduce it further in March or April, and then again. Prices would be higher, but they [the US] would have continued to increase production and to have replaced us, "- explained Wednesday at the Davos Economic Forum, OPEC Secretary General Abdalla Salem El-Badri.

Al-Nuaimi in December, and even he stated that the cartel does not matter what is now the price of oil. "Whether it will drop to $ 20, $ 40, $ 50, $ 60, it does not matter," - said the Saudi minister - it is important to maintain production at current levels. Oil plays a key role in the national economy (see. Incision), but the kingdom can endure even a few years of low prices, without compromising the generous social obligations. Official international reserves of the Kingdom amounted to $ 740 billion (IMF data for November 2014) - it is approximately equal to the annual GDP of the country. Plus, the government holds about $ 150 billion in various government funds and public debt is less than 3% of GDP, it said in a column for Reuters Nawaf Obaid, a visiting fellow at the Harvard School of Government Kennedy.

finanoic "safety cushion" in the foreseeable future does not question the "social contract, in which the kingdom of the population suffers a lack of democratic freedoms in exchange for a paternalistic generosity of the House of Saud," he wrote in October, a Middle East expert at the Washington Institute Simon Henderson.

What does it mean for the oil of Saudi Arabia:

Oil production - 9.5 million barrels / day.. (December 2014, the second in the world)

Share of OPEC production - 31% (December 2014)

Share in world production - 10% of the capacity of oil production - 12 million barrels / day.. (Assessment at the end of 2014)

Exports of crude oil - 7.7 million barrels / day.. (2013), 7.3 million bbl. / Day. (November 2014)

Proven oil reserves - 266 billion barrels. (16% of the world, first in the world)

Revenues from oil exports - $ 322 billion (2013)

The share of oil exports in GDP - 43% in total export earnings - 85%

The price of oil in the budget for 2015 - $ 55-63 per barrel. (Not disclosed, analysts' estimates)

A balanced oil price in 2014 - $ 100 per barrel.

Source: OPEC, Energy Management JohnUS formation, Bloomberg, Reuters, IMF

Saudis have already had a sad experience of losing their share of the market: in 1980 the kingdom tried to "adjust" prices, reducing its daily production to 10 million barrels. in 1980 to 2.5 million in 1985-1986. Contrary to the calculations, this has not led to the expected rise in prices, because other OPEC countries have not followed the example of Saudi Arabia. Oil continued to fall in price, and a kingdom lost its market share. "The Saudis want to make sure that will be enough to occupy a place in the market, not only tomorrow, but also in 2040 and in 2060, continue to guarantee a long life", - said the WSJ analyst Sarah Emerson of Boston ESAI Energy. This position will not change with the new king, she said.

Do not expect change and chief economist of the International Energy Agency, Fatih Birol. "I do not expect any significant changes in the oil policy of Saudi Arabia on the death of the King" - said Birol AFP in Davos. Analysts say that King Salman before his brother's death was actively involved in the economic policy of the kingdom. On behalf of King Abdullah's future heightShe fell in front of the Advisory Council [Majlis al-Shura, the Saudi zakonosoveschatelnogo authority] in early January, while his brother was in the hospital with pneumonia. In his speech on January 6, Salman said that recent developments in the market "is not something new, the government before coming to these questions with a firm will, wisdom and discernment - so it will be this time" oil. In fact, when The Argus said, it was clear support for the current oil policy.

According to rumors, the new king is suffering from Parkinson's disease, although the court is stubbornly denies, writes The Guardian. Whatever it was, not only the king creates oil policy of the state, although its power is sufficient for any decisions. In theory, oil policy defines the Supreme Petroleum Council, which includes the king, princes and several ministers, said Henderson of the Washington Institute. But the real power in these matters, in his estimation, is concentrated in the hands of 80-year-old oil minister al-Nuaimi. "Although about him say that he wants to retire, Nuaimi remained firmly grasp", - the expert says. In December, Eister assured that Saudi Arabia will not limit production, even if the oil price collapse to $ 20.

The personality and achievements of King Abdullah

The path to power

King Abdullah was born in 1924, in 2005, he came to the throne of Saudi Arabia. Abdullah did not receive a formal education. In his youth, he spent several years among the Bedouin. It was then, according to the official version, he has "a desire to help the development of its people."

Entry Abdullah to power began in 1962 when he was appointed head of the National Guard - the armed forces, designed to protect the royal family of Saud. The relatively late development of the monarch's career was associated with the absence of his oratorical talents (Abdullah suffered from speech defects) and the origin. Abdullah's mother was from competes with native Saud kind Rashidov.

In 1975, Abdullah was appointed second deputy prime minister. In 1982, he became heir to the throne when King Fahd, and since 1995, when the latter suffered a stroke, was regent and de facto ruler of the kingdom.

foreign affairsa

Experts evaluating the identity of Abdullah and his achievements on the throne, agree on the fact that during the reign he managed to stay in power and prevent binge frank extremism and to maintain relations with the leading Western countries to be good or acceptable level.

For example, although the origin of the majority of the Saudi organizers and perpetrators of the attacks of 11 September 2001, the United States and Riyadh were allies. The monarchy had a backstage help Washington during the invasion of Iraq in 2003. 11 years later, the Saudi Air Force took part in the fight against "Islamic state." In 2007, Abdullah became the first Saudi monarch, who met with the Pope (at that time it was Benedict XVI).

Women's rights

The Western media have repeatedly written about the problems of human rights in Saudi Arabia, including the situation of women. On the criticism of King supporters respond that the University of Technology, which bears the name of Abdullah, and women can learn, and together with men. In 2012, the first time a woman hads as part of the country's Olympic team. In 2011, the monarch promised to give them the right to vote in local elections to be held this year.

Abdullah policy allowed 10-25% of Saudi women to get a job. At the same time a driver's license they still are not issued. The monarch has repeatedly expressed its mercy convicted of violating Sharia law - both women and men.

Abdullah and the "Arab Spring"

Abdullah half-hearted policy emerged in reaction to the kingdom "Arab Spring" - a series of protests in a number of Middle Eastern and North African states. After the events of 2011-2012, Saudi Arabia did not carry out political reforms, focusing on the growth of social spending. In 2015, the Saudi budget expenditures will amount to $ 229 billion. A large part of the sum will be spent on education, health and infrastructure development.