What Can Investors Expect From The New Saudi Oil Minister?

Markets Benzinga

Over the weekend, Saudi Arabias Deputy Crown Prince Mohammed bin Salman named Khalid al-Falih as the nation's new energy minister. The change marks the first transition at the position since 1995.

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For U.S. oil investors, the impact of Falihs appointment on the global oil market remains uncertain, but some producers see any change as a potential positive.

The policies of Falihs predecessor, 80-year-old Ali al-Naimi, led to the global collapse in oil prices and the current oversupplied market. Oil investors are hoping that a fresh face and perspective could signal a change in Saudi policy.

He totally underestimated the resilience of the shale producers and their ability to achieve cost efficiency, said Praveen Kumar, executive director of the University of Houston Global Energy Management Institute.

They thought it would take six months and that timing was completely off... Naimis been there for decades. Getting him out allows the new power centers in Saudi Arabia to devise the long-term strategy for production and its role in OPEC, Kumar noted.

Related Link: OPEC Production Freeze Plan Now Off The Table

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Falih has at least a tangential tie to U.S. oil territory: He obtained his degree in mechanical engineering from Texas A&M in 1982.

Its doubtful that Falihs Aggie spirit will impact his oil policies. In the past, Saudi Arabia has focused on manipulating oil prices by altering its output, but Falih has said that economic reform, not oil prices, is the focus of the nations new leadership.

The oil market certainly didnt have a positive initial reaction to Falihs appointment. Shares of the United States Oil Fund LP (ETF) (USO) are down 2.4 percent on Monday morning.

Disclosure: The author holds no position in the stocks mentioned.

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