Saudi Arabia announced a major cabinet reform and reshuffle this morning 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:

·        "We are not going to accept to withdraw our production to make space for others."

·        "This is the position that we've earned...we are not going to leave that position to others."

·       "Saudi Arabia has never advocated that it would take the sole role of balancing market against structural imbalance."

·       "If there are short term adjustments that need to be made and if other producers are willing to collaborate, Saudi Arabia will also be willing to collaborate."

·       "If the prices continue to be low, we will able to withstand it for a long, long time...obviously we hope it will not happen."

There is so much misinformation being reported about today's development. Here are the facts:

·       Today's announcement was not just about the oil ministry. It was part of a major reform and reshuffling of cabinet departments. The oil ministry is now the "Ministry of Energy and Industry." The Water and Electricity Ministry has been dissolved. The water portfolio is not part of the environment ministry and the electricity portfolio is now with the energy ministry. Some media reports also incorrectly said Khalid Al-Falih was "fired" as health minister but he was obviously promoted to a new and expanded energy ministry.

·        It is quite natural that King Salman would want to make changes to the cabinet and make new appointments. Saudi oil ministers do not freelance, especially on such a sensitive policy matters involving oil production or Iran. The royal court has always made decisions regarding oil policy. Regardless of who is the oil minister, there is never daylight on oil policy between the minister and the King.

·       There is a new Saudi central bank governor with the appointment of Dr. Ahmed Al-Kholifey. He is currently deputy governor for international affairs and research and also Saudi Director at the IMF. We expect continuity in Saudi monetary policy. As we have previously written in client notes, we believe it is highly unlikely that the Kingdom will de-peg the riyal from the dollar.

·       We would also expect an upgraded role officially or unofficially for Prince Abdulaziz bin Salman who has been the Kingdom's influential Deputy Oil Minister for a decade and also a son of King Salman. Prince Abdulaziz is very active in OPEC activities and an astute observer of the oil sector often relying on market data in making assessments. He is highly respected and well thought of in the global energy community.