Saudi Arabia Is Getting Ready For "Peace" In The Oil Market, For Now

A shake-up in the Saudi government over the weekend, which included the replacement of oil minister Ali al-Naimi by Khaled al-Faleh, signals that the Kingdom is ready for peace in the oil market.
Long serving oil minister Ali al-Naimi was the architect of Saudi Arabia’s policy to flood world markets with oil in an effort to halt the American fracking revolution and to undermine Iran’s re-entry into world markets after the lifting of sanctions.
Back in February, for instance,  Ali al-Naimi told  American frackers publicly that they will be crushed by oil markets, as they don’t have the cost structure to survive an on-going price war.
Indeed, as oil prices plunged towards the mid-20s, this mission was accomplished: American frackers had no choice but to shut off scores of unprofitable rigs, helping both oil prices and America’s oil imports rebound. As for Iran, it was forced to make deals with many Asian and European nations at record low prices, in an effort to regain its old market share.
Apparently, Ali al-Naimi’s strategy helped Saudi Arabia win the war. But it opened up a big gap in that nation’s fiscal and social budget and overall economy in the process, threatening the social cohesion of the Kingdom.
In the end, someone had to take the fall. Thus, Ali al-Naimi’s replacement was imminent. The ministers of water, transport, commerce, social affairs, health and pilgrimage were also relieved from their positions.
While Ali al-Naimi won the war against Iran and American frackers, he failed to broker a peace in Doha, which could threaten the sustainability of the recent oil rally – and a sustainable rally is something the Kingdom desperately needs, as it is getting ready for Aramco’s IPO.
Hopefully, Khaled al-Faleh will achieve just that, as the Kingdom needs peace in the oil market. And peace is also bullish for the oil market. For now, at least.
 
Index/ETF
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Market Vector Oil Services (NYSE:OIH)
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Ipath S&P GSCI Crude Oil (NYSE:OIL)
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United States Oil Fund (NYSE:USO)
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http://www.forbes.com/sites/panosmourdoukoutas/2016/05/08/saudi-arabia-is-getting-ready-for-peace-in-the-oil-market-for-now/