McMonigle: New Saudi Oil Minister Doesn't Mean New Oil Policy

Takeaway: Saudi Arabia will continue its market share policy, rather than join the "freeze" oil production coalition.

Editor's Note: This is a special, abbreviated excerpt from an institutional research note written by Hedgeye Potomac Senior Energy analyst Joe McMonigle. It was written this past weekend, following news of the Saudi energy minister cabinet reshuffling. McMonigle continues to be ahead of consensus on key issues and developments impacting the price of oil.  

 

 

(On a related note, click image below to watch McMonigle discuss this topic on BNN earlier today.)

 

McMonigle: New Saudi Oil Minister Doesn't Mean New Oil Policy - mcmonigle image 5 9

 

Saudi Arabia King Salman Appoints Former Aramco CEO Al-Falih as New Energy Minister

Change in Ministers Does Not Mean Change in Oil Policy

 

Joseph McMonigle, Senior Energy Analyst

May 7, 2016

 

Saudi Arabia announced a major cabinet reform and reshuffle on Saturday that also included the appointment of former Aramco CEO Khalid Al-Falih as the new Minister of Energy and Industry replacing long-time oil minister Ali Al-Naimi.

 

Al-Falih is highly respected and well-known in the energy community. As Aramco CEO, he transformed a national oil company into a global energy company. His appointment will bring stability and credibility to the world’s second largest oil producer. When he left Aramco, he was appointed as the Saudi Minister of Health and also stayed on as chairman of the state oil company.

 

The most important take-away here is that a change in oil ministers does not equal a change in Saudi oil policy.  We fully expect the Saudi market share policy to continue at least through 2015, and therefore, we do not forecast any change in OPEC policy at the upcoming June 2 meeting in Vienna.

 

Beginning in January 2016, Al-Falih started to become more visible on Saudi oil policy having a prominent role at the World Economic Forum in Davos. His public comments have been very much in line with current Saudi oil policy.