Saudi Arabia’s new King Salman was quick to keep veteran oil minister Ali al-Naimi on Friday in a message aimed at calming a jittery energy market mindful of Naimi’s powerful role within the OPEC group of oil-exporting countries.
King Abdullah died on Friday and was succeeded by his brother Salman. In his first address to the nation King Salman vowed to maintain the same approach as his predecessors.
The 79-year-old Naimi has been a leading figure in the market for two decades and successfully argued in November that OPEC should hold output steady despite a sharp fall in oil prices in order to safeguard market share.
That policy is unlikely to change under Salman, analysts say.
“What is happening now is Kingdom policy, not just the King’s policy,” said analyst Yasser Elguindi of Medley Global Advisors. “The Kingdom will continue to make policy based solely on economic rather than political considerations. The oil weapon has long been defunct.”
With Naimi to stay for now, analysts said the focus was on for how long, as his departure could impact Saudi policy, OPEC and oil prices generally.
“Naimi is very likely to stay in the short run, not to make it look like the new king is gearing up for a policy change… there was talk he would be handing over in the coming year or so …In fact, this might delay his retirement somewhat,” said analyst Samuel Ciszuk of the Swedish Energy Agency.
“I think it will be difficult to change ministers in the current situation. If Naimi goes I would think that he would prefer to go after there is some order put back into OPEC,” said Olivier Jakob from consultancy Petromatrix.
SUCCESSORS, OPEC COHESION
Naimi’s successor would be just the fifth oil minister in Saudi history. His predecessors were Abdullah al-Tariki (1960-1962), Ahmed Zaki Yamani (1962-1986) and Hisham Nazer (1986-1995).
Khalid al-Falih, chief executive of state giant Saudi Aramco, and Saudi Deputy Oil Minister Prince Abdulaziz bin Salman are among the top contenders for the position, analysts say.
Naimi was promoted to the top oil job in 1995 after joining Saudi Aramco at the age of 12 as an office boy and rising to become CEO.
One of Saudi Arabia’s highest ranking non-royals, he is credited with deftly handling OPEC politics. He has also survived more than one price crash, including a fall of more than $100 a barrel in the latter half of 2008.
At that time he led OPEC as it implemented its biggest ever supply cut.
Yet still haunted by its failed attempt to prevent a steep drop in oil prices by slashing output by almost three quarters in the 1980s, Riyadh is determined not to make the same mistake again.
Saudi Arabia’s oil policy involves maintaining spare output capacity to help stabilise prices and a reluctance to interfere in the market for political reasons.
Yet Naimi has enjoyed great clout over these decisions and been granted wide scope to interpret and implement policy in the way he thinks best.
There is no guarantee that his successor would enjoy the same privileges within the Kingdom or OPEC, or would pursue the same market strategy.
Riyadh and its Gulf OPEC allies say it is time for others, such as Russia or U.S. shale drillers, to slow down; OPEC can no longer slash output, ceding market share, to spare them a downturn.
They argue that low oil prices will stimulate demand and slow output from high-cost producers without requiring OPEC to reduce output.