‘Everyday I’m shuffling…’ – I think this is the song that was stuck in the Saudi King’s head on Saturday.
Over the weekend, Saudi Arabia decided to re-shuffle its government. As the New York Times put it, “In a series of sweeping royal decrees announced Saturday, King Salman replaced top ministers and restructured government bodies, the first concrete steps in a bold plan to reduce the country’s heavy dependence on oil, diversify its economy and improve its citizens’ quality of life.”
The restructuring included a focus on the country’s oil ministry, which ousted longtime minister Ali al-Naimi.
These government reforms come as the oil-producing country struggles to keep its economy afloat amid falling oil prices. Earlier in the year, crude oil managed to trade at low levels last seen in September 2003. This decline is linked to the market’s oversupply and decreased demand.
So, the solution seems to be to cut supply, but Saudi doesn’t want to. Cue OPEC.
Given Saudi’s status as one of the world’s top oil-producing nations, al-Naimi was – by default – the OPEC leader. However, the OPEC nations were never able to come to an agreement on supply as Saudi was against any cuts.
And, just when al-Naimi started warming up to the idea of cutting supply, guess what happened? The King said bye bye, and Khalid-al Falih, chairman of the country’s state oil company Saudi Aramco, took over his post as oil minister.
The question analysts are now asking is: with al-Naimi gone, what’s going to happen to oil prices?
I guess we’re going to have to wait and see at the next OPEC meeting scheduled on June 2.
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