Why Saudi Arabia divided the Ministry of Energy

Saudi Arabia will share its Department of Energy, Industry and Mining with the current minister, Khalid al-Falih, who will be at the helm of energy policy. Industry and mining will be exempt from the appointment of a new minister, to head a new ministry.

The new industry and mining minister will be Bandar Alkhorayef, a businessman, and will begin joining in January next year, Reuters reports. [19659002] Bloomberg notes that the switch comes in the midst of Saudi Arabia's continued attempts to raise oil prices while continuing to trade significantly below its price, which estimates have hiked at over US $ 80 a barrel, despite the UK having some of the lowest production costs.

As the US-China trade war is raging and no deal is in sight, concern for global oil demand has become chronic now, keeping a lid on prices. Sourcing of shale production in the United States has also been a major headache for OPEC and its partners, and relief from this headache has been difficult to achieve.

Commenting on the government's shift in news and the implications for price control, Daniel Gerber, CEO of PetroLogistics, told, "Saudi Arabia has strategically reduced its exports to the United States in an effort to reign in US inventories, such as the market looks carefully at being a barometer of global supply and demand. "

However, Gerber added, "Reducing exports would further cut supplies to long-standing Saudi customers. Therefore, Saudi Arabia has a limited ability to significantly raise prices from today's level. But they maintain the ability to increase production, which means they have a huge influence on marketing prices by having available production capacity of more than 2 mb / d. "

" This is a crunching time now for the next few months, "a commodity analyst told Bloomberg." They can control the supply portion of the picture, but weak demand and the perception of it is what dictates the price, "said Edward Bell of Emirates NBD. Related: OPEC Abandon's & # 39; Whatever It Takes Strategy & # 39; & # 39; Boosts Production

Saudi Arabia has cut more production than it had been required under the OPEC + agreement of December last year, but that has not been enough as US shale oil production continues to increase kt, and the total national to date exceeds 1[ads1]2 million bd, according to the latest EIA estimate.

Demand continues to be lukewarm, with forecasts revising near-term projections downward due to concerns about slowing economic growth in key regions, including China.

Whether the split will have any positive effect on Saudi oil revenues is questionable, but it will certainly limit Al-Falih's focus to the kingdom's oil industry alone.

By Irina Slav for

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