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Oil dips as oversupply outweighs Saudi royal reshuffle

Saudi King Salman bin Abdul Aziz (right) and Crown Prince Moqren bin Abdul Aziz (left) meeting with Egyptian President Abdel Fattah al-Sisi on March 1, 2015 in the capital Riyadh. King Salman on Wednesday dismissed the heir to the throne, Prince Moqren.

[SINGAPORE] Oil prices dipped on Wednesday as oversupply outweighed political uncertainty in Saudi Arabia where King Salman relieved the crown prince as well as several senior ministers and the chief executive of national oil company Saudi Aramco.

In a surprise move, Saudi King Salman bin Abdulaziz on Wednesday sacked his younger half brother as crown prince and appointed his nephew, Deputy Crown Prince Mohammed bin Nayef, as the new heir apparent, state television said.

He also appointed his son, Prince Mohammed bin Salman, as deputy crown prince, and replaced veteran foreign minister Prince Saud al-Faisal with the kingdom's Washington ambassador Adel al-Jubeir as well as appointing several other new ministers.

In another move, Khalid Al-Falih, chief executive of Saudi Aramco, was appointed as health minister and switched to become the national oil company's chairman, a position previously held by veteran oil minister Ali al-Naimi.

Internal reshuffles in Saudi Arabia often move oil prices as stability in the world's biggest oil exporting country is key to global supplies.

Traders said they were closely observing who would become Aramco's new CEO and whether oil minister Naimi's position would be affected.

Mr Naimi, who is 79 years old and has been oil minister since 1995, has seen several oil price crashes in his tenure.

He is seen as have played a crucial role in Saudi Arabia's decision last November not to cut production in support of prices, which have halved since June 2014.

Benchmark Brent crude futures were down 10 cents at US$64.54 per barrel at 0300 GMT, rising from a low of $64.40 prior to the Saudi announcements. US WTI crude, less affected by the Middle East than internationally traded Brent, was down 17 cents at US$56.89 a barrel.

Outside politics, analysts said that fundamentals pointed to ongoing weakness, although price volatility was seen to be high. "Despite a 45 per cent rally in oil prices from their January lows... we do not think the commodity cycle is turning conclusively just yet and expect a lot of price volatility ahead," Barclays said in its quarterly commodity review, published on Wednesday. "However, supply growth in many markets is still too rapid and high inventory levels are likely to be a drag on prices for some time," it added.