Oil fell to the lowest in almost six years on speculation the death of King Abdullah of Saudi Arabia won’t signal any change in strategy for the world’s largest crude exporter.
US benchmark oil futures slid 1.6%t, reversing an initial gain of as much as 3.1%.
Salman Bin Abdulaziz Al Saud, who succeeds Abdullah on the throne, said he would maintain his predecessor’s policies.
The kingdom will not cut production to boost prices because other producers would fill in the gap, Saudi Prince Alwaleed Bin Talal Al Saud said.
US crude inventories rose the most since 2001 last week, according to a government report on Thursday.
“There already has been a pretty well established succession plan so it’s not a big deal,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston.
“Supply has been very stout and demand’s not been what people had expected. It highlights the bearish sentiment in the market.”
Oil has slumped about 36% since the Organization of Petroleum Exporting Countries’ November 27 accord to maintain production at 30 million barrels a day amid a glut caused in part by the fastest US output in three decades.
Saudi Arabia’s oil strategy is likely to remain unchanged as King Salman assumes power, Fatih Birol, chief economist at the International Energy Agency, said at the World Economic Forum in Davos, Switzerland.
West Texas Intermediate crude for March delivery fell 72 cents to end at $45.59 a barrel on the New York Mercantile Exchange, the lowest settlement since March 11, 2009. Futures fell 6.4% this week.
The volume of all futures was about 13% above the 100-day average.
Brent crude for March settlement advanced 27 cents, or 0.6 percent, to $48.79 a barrel on the ICE Futures Europe exchange after climbing to $49.80.
Volume was 2% above the 100-day average. Brent, used to price more than half the world’s oil, ended at a premium of $3.20 to WTI on the ICE, compared with $1.04 on January 16.
The euro dropped to the lowest level in more than 11 years versus the dollar as the European Central Bank widened its stimulus program.
A stronger dollar reduced oil’s investment appeal.
Saudi Oil Minister Ali Al-Naimi, who led OPEC’s November decision to defend market share against surging US shale supplies, remains in his post, according to state-run Saudi Press Agency.
“The mild market reaction is pretty rational,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “It’s highly unlikely that you are going to see any major change in oil policy.”
Oil won’t return to $100 a barrel and global oil supply will be affected by the price slump, Alwaleed said in an interview.
“If we reduce our production some other countries will fill that gap,” he said. Saudi Arabia isn’t happy with low prices, “but it’s something you have to face head on without hesitation.”
Saudi Arabia’s stance of maintaining output levels will remain unchanged, said Commerzbank AG, BNP Paribas SA and Bank of America Corp.
“The new king will stick with the same oil policy — it doesn’t make sense to change it,” Eugen Weinberg, Frankfurt-based head of commodities research at Commerzbank, said by phone.
King Abdullah oversaw a fivefold expansion in the size of the Arab world’s biggest economy and met the Arab Spring with a mixture of force and largesse. He died after almost a decade on the throne.
He was born in 1924.
The royal court said Salman, 79, was named king and Prince Muqrin, 69, another half-brother, has been chosen as Crown Prince.
Salman appointed Prince Mohammed bin Nayef, the country’s Interior Minister, as deputy crown prince and his son Mohammed bin Salman as defense minister, Saudi State Television reported.
“The transition has been smooth,” Mike Wittner, head of oil research at Societe Generale SA in New York, said by phone. “All signs point to stability. All ministers are to continue at their post, including al-Naimi.”
Oil Minister Al-Naimi, who has driven decision-making at the ministry since 1995 and turns 80 this year, has said he’d like to devote more time to his other job, chairman of the science and technology university named after the late sovereign.
US crude inventories rose 10.1 million barrels in the week ended January 16, the biggest gain since March 2001, the Energy Information Administration said Thursday. The gain left crude supplies at 397.9 million barrels last week, the highest level since May.
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