Oil rises as new Saudi minister commits to output cuts

Saudi Arabia's new Energy Minister Prince Abdulaziz bin Salman center and United Arab Emirates Energy Minister Suhail al-Mazrouei right walk through an energy exhibition in Abu Dhabi United Arab Emirates Septembre 9 2019

Saudi Arabia's new Energy Minister Prince Abdulaziz bin Salman center and United Arab Emirates Energy Minister Suhail al-Mazrouei right walk through an energy exhibition in Abu Dhabi United Arab Emirates Septembre 9 2019

This was the same fate that befell his predecessor, Sheikh Zaki Yamani, who was terminated as energy minister by King Fahd in 1986 for failing to lift the price of oil to $18 a barrel.

In this view, higher oil prices would translate into a higher valuation for the company, which the country's de facto ruler, Crown Prince Mohammed bin Salman, has said is worth $2 trillion.

Oil extended gains from the highest level in nearly six weeks as Saudi Arabia's new energy minister signaled his commitment to output cuts, while US crude stockpiles are expected to continue their decline.

Brent crude futures gained $1.05, or 1.7 per cent, to settle at $62.59 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose $1.33, or 2.4 per cent, to settle at $57.85 a barrel.

He added that the so-called OPEC+ alliance, made up of OPEC and non-OPEC producers including Russian Federation, would be in place for the long term.

Prince Abdulaziz, son of Saudi King Salman and a long-time member of the Saudi delegation to the Organization of the Petroleum Exporting Countries, replaced Khalid al-Falih on Sunday.

Khalid Al-Falih, the former oil minister and the mastermind of the Opec+ pact, has been dismissed amid ongoing preparations for Saudi Aramco's initial public offering. We don't see the move as a prelude to significant change.

While the rest of the market was stuck in sideways action, energy sector-related exchange traded funds led the charge Monday on rising oil prices in response to Saudi Arabia energy minister's confirmation that there will be no major change to the kingdom's oil policy.

Dan Brouillette a US deputy energy secretary iat the World Energy Congress in Abu Dhabi United Arab Emirates
Dan Brouillette a US deputy energy secretary iat the World Energy Congress in Abu Dhabi United Arab Emirates

The prince had helped negotiate the deal between the Organisation of the Petroleum Exporting Countries and its allies, a group known as Opec+, to cut global crude supply in order to support prices and balance the market.

But booming USA shale oil production continues to chip away at efforts to limit the global supply overhang, weighing on prices.

"If I (am) to be concerned with IEA projections, I'll probably be on Prozac all the time", Prince Abdulaziz said with a laugh, referring to the well-known antidepressant.

Earlier in August, Emma Richards, senior business analyst at Fitch Options, stated that within the present gloomy market sentiment, OPEC would need to deepen the manufacturing cuts by 1 million BPD if the cartel needs to maneuver up the worth of oil.

Concerns about the health of the global economy caused oil prices to fall sharply during the fourth quarter of 2018 and again in the second and third quarters of 2019.

Previous supply cuts have mostly succeeded in bolstering prices.

In April the head of the IAEA said his agency was asking Saudi Arabia to agree to safeguards on nuclear material that could arrive by the end of the year for its first atomic reactor.

Citing a copy of a document it had seen, the global news outlet said US Energy Secretary Rick Perry had granted six secret authorizations to companies to sell the know-how to the desert kingdom as part of a hoped-for broader deal on nuclear power.

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