Age of uncertainty
The removal of Ali al-Naimi as Saudi Arabia’s oil minister ushers in a new age of uncertainty, and more erratic prices. Naimi was a major architect of Saudi’s current policy of forcing oil prices lower through higher supply of crude, but he was also a trusted voice within government and a respected figure at the Organization of the Petroleum Exporting Countries. His successor Khalid al-Falih is unlikely to command the same influence over output decisions that his 80-year-old predecessor had once enjoyed.
The son of a Bedouin who climbed through the ranks of Saudi oil industry technocrats, Naimi commanded the respect of successive rulers in the oil-rich kingdom. Through boom and bust cycles he repeatedly emphasised that Riyadh’s oil policy was driven by market forces and not politics. Over almost 21 years as oil minister he was given a large degree of autonomy to devise the best strategy for the kingdom.
That arrangement has now changed. Falih represents more centralisation of power by his royal masters. With Naimi gone there is little in the way of the kingdom’s powerful Deputy Crown Prince Mohammed bin Salman dictating oil strategy as part of his plan to reform Saudi’s economy – which is helpful – and put pressure on Iran, its main political rival in the Middle East – which may not be.
That could make Saudi’s already strained relations with its partners in OPEC even worse. Naimi was skilled at achieving a consensus that basically saw him get his way without completely alienating smaller members, or Iran. Falih is unlikely to have the personal capital to negotiate the best deal for Riyadh when the 12-member cartel next meets to discuss production in Vienna on June 2. All this means uncertainty – the thing oil markets hate.