Saudi ouster will send oil prices ‘lower for longer’

The recently announced changing of the guard in the Saudi oil ministry and the news spin around it says it is time to separate political banter and political reality.

The banter is about a big surprise in the dismissal of Ali al-Naimi as Saudi energy minister. The reality is that this move has been preordained for some time now. Why? At 80 years old, a relic of the prior King Abdullah, King Salman having sacked most of the appointees of that regime and the plans for taking state oil giant Aramco to an IPO all put the handwriting on the wall.

Likely this was known for some time, but for sake of impact positioned as a serious event. In fact, it is a serious event and will likely set the stage for further declines in oil prices.

OPEC has been a divisive cartel since inception: price doves with high oil revenues per capita (led by Saudi Arabia) versus the price hawks (the have-nots such as Iran, Iraq Libya, Venezuela, etc.).
In the aftermath of $100+ per barrel oil prices and with Saudi Arabia having successfully implemented its first phase of market-share recapture, OPEC meetings have become virtually farcical encounters. Divisiveness has grown at a time of political unrest and the price hawks' need for oil revenues. As a practical matter, Saudi Arabia can no longer serve as the arbiter of OPEC, nor does it seem to want to.

Kolanky