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Thursday, July 20, 2017

In Saudi Arabia, eliminated the oil Minister

Saudi king Salman bin Abdul-Aziz al Saud has dismissed the Minister of oil his country Ali al-Nuaimi, who held this position for over 20 years. The office was abolished, and instead, it appeared the Ministry of energy, industry and mineral resources, headed by a former head of the Saudi Ministry of health Khaled al-Faleh. Arab experts believe that thus the monarch of Saudi Arabia centralizes power in the country. In the first phase on the prices of “black gold” this decision is not particularly affected. But in the run up to the end of the year quotations can grow. However, if al-Faleh will pursue a more progressive policy and agree with Russia about reduction of oil production.

photo: morguefile.com

Al-Nuaimi headed the Ministry of oil of Saudi Arabia since 1995. He is now 80 years old and until very recently he was considered one of the most influential Ministers of OPEC. In many respects thanks to it the price of oil for two decades, first shot up from $17 to $147 per barrel (it was in the summer of 2008) and then fell below $30 (in February 2016).

Now the barrel is worth a little over $45. Apparently, this did not satisfy Salman bin Abdul-Aziz al Saud, who became Saudi king in early 2015 after the death of his half-brother Abdullah. Despite the fact that the reshuffling in the government of the Kingdom of the middle East, primarily associated with the desire of the al Saud to centralize power in the country and impose a more controlled footage (apart from the oil Ministry its name changed to the Ministry of Commerce and industry of Saudi Arabia, which is now called the Ministry of trade and investment), low oil prices is also a reason for the dismissal of Ali al-Nuaimi. It is believed that the latter strongly disagreed with the proposal of a number of the world’s oil producers to “freeze” production at the January level because of the overstocking of the market and the excess of it unclaimed raw materials. The last international negotiations in Qatar, which took place on 17 April, ended in failure. Now the prices stay above $45 per barrel only due to the increase in seasonal demand and the backstabbing speculators.

But the main fundamental factor of growth of quotations should be a collective decision of the major miners of “black gold” on restriction of production and increased demand for raw materials from the largest importers — China and India.

The preconditions for this. Most of the countries of the OPEC and independent oil producers, such as Russia and Colombia, have long insisted on the decline. The main opponent of this is Iran, which intends to increase production to 4 million barrels a day, as it was before the introduction against Iran the Western sanctions. Riyadh in a sense, is in the position of hostage. On the one hand, the Saudis do not benefit low prices — because they would have to close or preostanovlena infrastructure, transport and building projects. On the other hand, Riyadh is afraid to cut production, as Tehran will immediately intercept the part of foreign customers. The cost of production in Iran is the same as in Saudi Arabia, so this would be not difficult.

However, there is no doubt that Iran will be able to dramatically increase production. This can put the weak technological base of the country, and the lack of investment in the industry.

But China and India can prices and toss. Oil imports to China in the spring has increased from 5% to 21.6% monthly. Delhi increased purchases of refined products outside Russia 7.5%, is also positive.

If Khaled al-Faleh will add fuel to the fire, and agree to limit production, then the barrel will rise again in price. Perhaps it will not happen immediately, and closer to the end of the year, when the cost of the “barrel” is likely to be over $50, and even crawls under $60.

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