Oil Dips after Saudi Royal Reshuffle

Oil prices slipped on Wednesday on oversupply after news that King Salman of Saudi Arabia had altered the kingdom's line of royal succession in a dramatic reshuffle.

King Salman bin Abdulaziz sacked his younger half-brother as crown prince and appointed his nephew, deputy crown prince Mohammed bin Nayef, as the new heir apparent.

He also appointed his son, Prince Mohammed bin Salman, as deputy crown prince, and made several other ministerial changes.

Saudi reshuffles often move oil prices as stability in the world's biggest oil-exporting country is key to global supplies, but Wednesday's announcement had little obvious impact.

Brent crude oil was down 24 cents at $64.40 a barrel by 1035 GMT. U.S. crude was down 36 cents at $56.70.

"The Saudi king's death a few months ago did not have a long-lasting impact on prices, so these changes may not either," said Tamas Varga, analyst at London brokers PVM Oil Associates.

The Saudi reshuffle touched the oil sector.

The chief executive of state oil firm Aramco, Khalid al-Falih, was appointed health minister, according to the Saudi Press Agency (SPA). Saudi-owned al-Arabiya television also said he had been named chairman of Aramco, a position hitherto held by Oil Minister Ali al-Naimi, who kept his ministerial post.

A decree published on SPA did not mention a new role at Aramco, but oil traders said they were closely monitoring the situation to see whether there would be a new Aramco CEO and whether Naimi's position would be affected.

Naimi, 79, has been oil minister since 1995 and was seen as key to Saudi Arabia's decision last year not to cut output to support crude prices, which have halved since June 2014.

Analysts said they expected little change in Saudi oil policy at a time when the oil market was oversupplied and facing a seasonal dip in demand.

"I don't think there's been any disagreement about the idea of keeping up production, maintaining market share, refusing to be a swing producer," said Clement M. Henry, professor at Middle East Institute, National University of Singapore.

Oil fundamentals point to more market weakness in the short term, analysts say.

"Supply growth in many markets is still too rapid and high inventory levels are likely to be a drag on prices for some time," Barclays (BCS) analysts said in a note to clients.
 

By Christopher Johnson and Henning Gloystein