Oil prices are more likely to rise toward $70 a barrel than sink back to $50 in the wake of the biggest political shakeup in Saudi Arabia in decades, according Roberto Friedlander, head of energy trading at Seaport Global Securities.
Crude futures rose to highs going back to mid-2015 overnight after Saudi Crown Prince Mohammad bin Salman orchestrated the arrest of several princes and ministers over the weekend. The Saudis framed the purge as a crackdown on corruption, though some analysts said it was likely a move by bin Salman to consolidate power as he embarks on an ambitious effort to reshape Saudi Arabia’s economy.
Following three years of soft oil prices, the Saudis have drained budget surpluses and now need to return to economic growth in order for the crown prince to survive, Friedlander said in an email briefing on Monday. The purge of powerful figures like Prince Miteb bin Abdullah, the former head of the National Guard, appears calculated to remove opposition to bin Salman’s plans, he said.
“The Saudi Situation means $70 before $50,” Friedlander wrote.
Bin Salman, who is widely expected to soon become king, is trying to generate growth by transforming the Saudi economy. Selling off a stake in state oil giant Saudi Aramco next year is the cornerstone of the plan, called Vision 2030.
