Oil Shocker: Saudi Arabia Fires Powerful Oil Minister al-Naimi In Dramatic Power Reshuffle

Tyler Durden's picture

For years, Ali al Naimi was the most important person in the world of oil: the former CEO of Saudi Aramco ascended to the post of Saudi oil minister in 1995, and over the past 21 years had the power to send the price of oil soaring or plunging with one word. To be sure, over the past two years it was mostly plunging because as is well-known, Saudi Arabia's policy ever since the 2014 Thanksgiving OPEC meeting in which Saudi Arabia broke off from the rest of the petroleum cartel to pursue its intention of putting US shale and high cost OPEC production out of business.

Then things unexpected, and dramatically, changed in April when Bloomberg published a detailed interview on the present and future of Saudi oil policy, which however took place not with al Naimi but with a young man few had heard of: Deputy Crown Prince Mohammed bin Salman, barely 30 years old, who just happens to be the favored son of Saudi Arabia's new King Salman who took control one year ago.


Suddenly not all was well in the top power echelons of oil, and less than three weeks later the FT wrote an extended profile of prince Mohammed bin Salman whom it dubbed "the unpredictable new voice of Saudi oil." This is what it said:

As the fallout from collapsed oil talks in Doha reverberates, Saudi Arabia’s Mohammed bin Salman has emerged as the unpredictable new voice of the kingdom’s energy policy.


The 30-year-old deputy crown prince and favoured son of King Salman was not even in the Qatari capital, where many of the world’s biggest oil producers had gathered in hopes of brokering the first global output deal in 15 years in an effort to arrest a prolonged price slide.


Still, his message echoed through the marble halls of the Sheraton: there would be no production freeze without Iran.


Around 3am on Sunday morning — just hours before the talks were due to begin — Prince Mohammed called the Saudi delegation, according to people briefed on the matter, and ordered them to come home. The Saudis ultimately remained, but the talks were effectively dead.

For oil watchers Doha was not so much about OPEC oil production, but about a huge power move that had just taken place in Saudi Arabia, as a result of which al Naimi had become irrelevant overnight.

The FT confirmed as much:

"the episode has left Ali al Naimi, the kingdom’s technocratic oil minister for the past 21 years, looking increasingly sidelined. While the Saudi royal family has always had the final say on oil policy, rarely has a member spoken so publicly — or freely — on its direction. Delegates from other countries had been assured Mr Naimi was there to deliver a deal. “Saudi Arabia’s oil policy is now firmly in the hands of Deputy Crown Prince Mohammed bin Salman,” said Sean Evers, managing partner of Gulf Intelligence in Doha."

This is all came to a stunning culmination moments ago, when Al Arabiya reported the shocking, if inevitable news, that Saudi Arabia has fired long-serving oil minister Ali al-Naimi, on Saturday. According to the WSJ, Naimi would be replaced with Khalid al-Falih, chairman of state oil company Aramco.

The royal decree, announced via state media, is part of a wider government reshuffle that includes a restructuring of the oil ministry, which has been renamed the Ministry of Energy, Industry and Mineral Resources, but the ultimate target is al Naimi who after 21 years at the helm of Saudi oil policy is gone, replaced effectively by bin Salman himself.

Who is al-Falih? Recall that shortly after the new Saudi King Salman bin Abdulaziz took power in 2015, he promptly shook up the nation’s energy industry on Wednesday, after he appointed Khalid al-Falih as the new chairman of Saudi Aramco and the country’s health minister (al Naimi had also been CEO of Aramco before he was elected to oil minister). Previously al-Falih was CEO of Aramco since 2009.

Even then the WSJ reported, that "the elevation of Mr. al-Falih from chief executive to chairman of the state-owned company raised questions about the tenure of the nation’s long-time oil minister, Ali al-Naimi, an influential figure in the world’s oil markets who has said he wants to retire soon."  When Falih replaced al-Naimi as Aramco chairman, it was widely expected that he had become a contender to eventually take over the oil ministry.

What else do we know about al-Falih? Not much: he sits on the Board of Directors of U.S.-Saudi Arabian Business Council and also serves as a member of the JP Morgan International Council.

But ultimately this is not about the new oil minister: this is about Prince Mohammed taking full control over Saudi oil.

So the question everyone now wants answered is "what does this mean for oil?"

While nobody knows the answer, what is clear is that over the past 2 months, Prince Mohammed has had a far more hawkish outlook on oil prices. As noted above, it was Mohammed who effectively scuttled the Doha oil deal which was "this close" to reaching a conclusion before a last minute collapse as the crown prince intervened, overriding al Naimi's proposal.

Furthermore, as the FT reported at the time, "there were other signs that Saudi Arabia’s oil ministry was preparing for a deal. Between January and March the country held its oil output at around 10.2m barrels per day — a level consistent with the proposed freeze." Then a few weeks ago, Prince Mohammed once again poured cold water over any expectations that Saudi Arabia would permit higher oil prices when he said last week said "the country’s production could immediately rise to 11.5m b/d — if there was demand."

In other words, on the margin al Naimi's termination and Prince Mohammed's official ascent to the top of the Saudi oil chain of command is likely bearish in the short term, as Saudi Arabia reverts to its 2014 strategy of pushing oil prices low enough to put marginal producers out of business, a process that due to relentless hedging and generous banks, has taken way too long.

In summary, it is likely the slow fruition of Saudi plans to put high cost producers out of business, coupled with Saudi Arabia's own economic deterioration that forced the king to take this drastic measure.

As for the real impact on the price of oil, we will have to wait until Monday, although we can't wait to see what happens if Saudi Arabia's intentions are to push oil far lower once again to shock the complacent marginal producers and put them out of business once (or maybe twice) and for all, while algos and central banks continue to do everything in their power to push it higher.

Now that showdown will be worth the price of a barrel of oil or two.

* * *

Also, in addition to replacing al Naimi, Saudi King Salman also appointed Ahmed al-Kholifey - currently an IMF executive director - Saudi Arabian Monetary Authority Governor, promoting him from vice governor and replacing Fahd al-Mubarak in charge of the kingdom's central bank. He also appointed Yasir al-Rumayyan, an adviser to the Royal Court and secretary general of the Public Investment Fund, and former SAMA governor Mohammed al-Jasser as advisers to the General Secretariat of the Cabinet.

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Looney's picture

Please, don’t call this a Black Swan. In Saudi Arabia it is called a Black Goat event.

Same shit, different… marsupial?  ;-)


HowdyDoody's picture

The first high level head rolls. ...



TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) HowdyDoody May 7, 2016 10:34 AM

...off in a Lambo with hundreds of millions of dollars in the bank.  I feel so sorry for him.  

johngaltfla's picture

This should be good for a solid 2-3% drop in GCC markets tomorrow morning. Time to grab some camel burgers and enjoy the fireworks.

thesonandheir's picture

One tea-towel head out, one tea-towel head in.


What's the big deal again?

Poundsand's picture

The big deal is the death of King Abdullah.  The Shia Iranians have been preaching for over a decade that the death of the King would get the big ball rolling, ending with the revelation of the 12th Madhi. When I say preaching I mean full on government documentaries etc...  Whether the Saudi's (Sunnis) believe the prophecies or not really doesn't matter, because the Iranians certainly do.  War is coming, the Iranians feel bound by God to bring it, regardless of the cost.

The Saudi's are pulling every $$ they can out of those fields.  They need those $$'s to buy weapons and people to carry them.  Merc's are expensive.  They will need a lot more.  They remember how the US pitted the Iranians against the Iraqis in the '80's and how as long as they were fighting, the US didn't care who won, as long as no one won.  No one did, but millions died.  If you don't think the Saudi's don't think they are the new battle line against Iran, than you don't understand the tension developing between the US and the Saudi's.  They realize that we could take Syria in 30 days if we wanted to, but of course, we don't.  Just a new battle front to the north, now that Iraq is about to fall to the Iranians and that front moves about 200 kilometers to the west. 

They want to bankrupt the oil tar sands?  Please.  This is an existental issue for them.  My big wonder is when they take delivery of those Pakistani nukes they paid for.

D Nyle's picture

Yes, and I think they already have the nukes


marbilly's picture

ding ding ding ding ding ding.....cue mossad?....i dont know, why would the israhellis risk total complete destruction if they coopreate with the saudis to hit the us? doesnt seem like a sustainable strategy to me...but hey, i aint no bedoin goat fucker nor a jew baby dick biter...so....pfftt...i guess anything goes...

D Nyle's picture

Grow up you moron, Israel build the Black rock in Mecca and have been friends for longer than America has been around. The anti Israel tripe is an old strategy to get warriors to fight for the cause, Israel has also been using the same strategy of muslim terrorism for the same amount of time. Recommend you get a real job outside the states, but that requires a real education, Hint:Engineering. Your drabble pretty much says your too stupid for that, so go join the cause, ISIS or Al Qaeda are looking for idiots. Oh while your there, then you'll find out that actually attacking Israel is not an option (largest food/parts/shipping/etc supplier to muslim countries is Israel)

D Nyle's picture

Why do they keep saying Saudi is doing this because of Shale oil, that is a small blip in the oil market and an Obama talking point, this is to stop Russian, Venezuala and Iran alliance.

Hint, Valerie Jarrett is Iranian (Shite), Huma Abedin is Sunni raised in Saudi Arabia, therefore the hate between Obama and Clintons (Money)

just the tip's picture

it's a win-win for saudi, they wreck the cartel you mention and hussein was tired of hearing how healthy the economy of texas is.  two wrecks from one action.  each doing a favor for the other.

marbilly's picture

the ben rhodes article is telling, this is not the barry administration doing something nefarious, tricking people, theyre told to do this by us establishment, read wall street, they need new markets, blackswan or goat (ill eat both) i dont care, this cuntry is in my death pool and this is great news, some shift is happening, i missed the moment when us elites decided to go with iran, rather than saudi after all these years, makes sense though, from a capitalist point of view, saudi is a mature market, iran is from that prespective an untapped market of YOUNG (meaning the market has legs) 70-80 million douchebaggs who arent jihadists, they finally figured outthe iranian psyche, ok it took 41 years or whatever, but they finally figured out when iran says death to the great satan, its more bluster meant for interior control than a threat, i mean ok it took fucking 41 years for the us elites to stop being so paranoid about iran...by the way has anyone done a wikipedia search on irans military....a notch above colombia...we're talking about propeller planes...yeah they got some f14s and missiles but realy people they have no military, iranians themselves know this, the iranians who are IN the quds force, and the revolutionary "guard" are in it for the ray bans ™ not for death and destruction...they know this themselves...unless of course you invade them...which the us never contemplated..ever...not even for a moment under cheney-bush...anyway, the shift is by us elites who need new untapped markets to keep the casino going, see myanmar, notice how fast the uk jumped in, it was literally the next day after they declared they were going "democratic", literally the next day.

saudi is in my country death pool for 2016.  (but really is this any surprise? to anyone not named bush? or at 11 downing? the entire thing was always unsustainable, a terrible game, the saudis supported alqueda financially and the madrasas in pakistan and bin laden, EXCEPT on 9/11...right? ...and this would never be found out...right?) not sustainable...say what you want about iran...its been around much longer than saudi , even if we only count the westphalian era...and it aint going no where because why? because it wasnt a british and then us whore...plain and simple....iran is not the country getting abandoned....if i were the saudi "princes" id cashout and call it a day now...dont try to force it..dont try to save yemen or bahrain...Syria?  forget about it...youve been in check for at least a year....this is mate....it is . over.

KnuckleDragger-X's picture

Those who the gods would destroy, they first make mad......

44magnum's picture

Why do they wear dish towels on their heads?

RogerMud's picture

they wonder why we don't wear them.

bthunder's picture

With MANPADs about to enter Syrian war and the Saudi oil about to flood the market, I wonder if Pooti-Poo is having a good pre-Russian V-day holiday weekend...

cheech_wizard's picture

If you follow the whiners at the U.S. State Department, the moment a manpad is fired at anything remotely Russian, what's left of Aleppo will promptly be bombed flat.

RogerMud's picture

MbS calling the shots now? palace coup in 3..2..

___________'s picture
___________ (not verified) May 7, 2016 10:36 AM

arabs are one of the most disgusting non-humans in the world.
i think its time to kill their elite and force the population to slave work.

arabs are quite useful to construct islands with their childrens bodies - drown them in the sea

not a single muslim in this world is worth to breath air

Iwanttoknow's picture

so are F...ing Joos and their chrisoziondicksucker trailer trash scum.

WTFUD's picture

The only positive thing i can say about this guy is that his edumakation was local and not under the auspices of the special UK indoctrination programmes.

RogerMud's picture

right, it was under the Wahhabi indoctorination programme.

Brokenarrow's picture

we should do what we do best. fuck them all. take their oil and leave them to hump their camels. who will stop us? im tired of kissing ther ass. the prince looks like a rear admiral, anyway.

Amalgamated Tang's picture

And who is going to lead this attack? Who is the Commander in Chief? Will the green leader fight for climate-change-producing oil?

CEOoftheSOFA's picture

Saudi is running out of oil anyway.  Soon they will be irrelevant.  

dicksburnt's picture

petrodollar dyeth

Last of the Middle Class's picture

Wonder if his head feels loose.


oncemore's picture

Such idiots.
Am happy they have done it. Within few years they will lose all of their wealth fund and ability to launch wars.

outlaw.guru's picture

Something here looks counterlogical. The minister who started the entire process of overproduction of oil is getting replaced by another guy who wants an overproduction of oil. Sounds more like a change of tactics than a continuation and some scape goating. Also the Saudis can't really expand their production much more. But they can take a 1m barrels out of production and actually make some money.

PPT Inc.'s picture
PPT Inc. (not verified) May 7, 2016 11:30 AM

Correction: the Saudis policy is to export more oil. This serves to push down price, yes, but the Saudis have all-in costs of less than $5/basrrel so there is no reason to ignore the fact the polocy makes them more money so long as they can't (yet) get back to the cartel outcome, which they can't. The Fed buying Crude futures is pushing the price up despite the record Sauudi and OPEC production and the record US crude inventories.

yogibear's picture

Time for the petro dollar to die.


FORCE's picture

old saudi saying;my grandfather rode on a camel, my father drove a mercedes,i am driven in a bentley,my son flies in a helicopter & my grandson will ride on a camel

moneylover3's picture

Slippery oil...oops power!

Ignorance is bliss's picture

It's good to see some Arab dick get his comeuppance. Something is definitely in the wind. I noted the Russian oil pricing in Rubles is also being released. Just 2 weeks ago we had the Saudi threat to release the Kraken ..I mean U.S. bonds. Coincidence...doubtful. The blow back to America and our way of life is Going to be historically tragic.

NoWayJose's picture

Blame Trump... Starting in 10, 9, 8...

GRDguy's picture

When snakes get hungry enough, they turn on each other. And not just in Saudi Arabia.

83_vf_1100_c's picture

  Not shocking. hillary being indited would be shocking. Someone on ZH being sympathetic to the Jews who are literally surrounded by those who would chop off their children's heads would be shocking. Alice and Mel kicking that 2nd guys ass and taking back the table cloth he stole from their diner might not be exactly shocking but would be an instant YouTube hit. Go ahead, jack gas back to $4/gal. I'll park the SUV and drive the Nissan or ride my bike. We have horses if it gets bad enough.

JustUsChickensHere's picture

Ok I'll do it - be sympathetic to Jews - well some Jews. A few indiviuals that I know personally and are good people. And they are pretty pissed of at some of the other Jews who leave them with the blowback from nasty actions.

Do you see what is wrong with generalisations?

Just hate the individual creeps - of all nationalities and religions - creeps who do nasty things. Make the individuals accountable for their actions - not some arbitrary group.

Big Stapler's picture
Big Stapler (not verified) May 7, 2016 2:39 PM

The Saudi leadership is all 75yrs plus old (some of them a LOT more than 75). Their dynasty / royal empire / whatever you call it is a matter of family pride, etc. They must groom younger generations to take over in the next few years -- or their empire will be over run by Iran.

They replaced a really old guy, who is still available for advice, with a much younger guy. They moved the 30yr prince who's name I can't spell into more leadership roles.

I don't know if these younger guys are good or bad leaders, but organizations that don't plan for future leadership won't have a future. Royal families and business school professors both call it "succession risk".... and Saudi Arabia has some serious succession risk with all their leaders pushing 80-90 years old.

Jack Welch stayed too long at GE, and Immelt clearly wasn't groomed for the job (see stock price, 2008 bailout, etc). Steve Jobs was a genius, but it was impossible for Tim Cook to be groomed for the role while also playing #2. Succession risk is a very real risk.

Future Saudi leaders will need to adapt to the end of the petro-dollar, the near collapse of G7 geopolitical leadership, the shift toward Asia, the rise of Iran, radicalization of Islam ... and those are just the problems everyone knows about.

It would be pretty dumb for the Saudis to wait until their current leadership dies before training the next group of leaders.

donebydoug's picture

Sure hope he doesn't lose his head over this....

Pimp My Cannon's picture

Jubeir announced to Kerry last week in Geneva at the Syrian Peace Talks that KSA reserves the right to acquire and use nuclear weapons if Iran does not play nice. This led to a row between  the two.

When Kerry said "You can't just purchase nuclear bombs" he was referring to the Jubeir announcement.

What's interesting is today Israel greenlighted publicly Saudi's decision and said they stand with them in their steadfastness to not allow Iran to become a nuclear power.

The Jews and Arabs have publicly announced they are willing to be nuclear partners and the media does not find that newsworthy?

May you live in interesting times...

Gohigher's picture

JP Morgan ? oh hell yes ....
Old man Saudi minister probably wanted to stop the geo-politics to preserve the public unrest boiling up from the Saud Spring events. Of course JP Morgan wants the US Shale reserves on the block and the Russians on the ropes..... it is taking too long to rape the industry, preserve the petrodollar, so set a few extra torpedoes in the hull of the USSA and Ruskies. Hurry the world is catching on and changing positions to outrun our positions.

Fuck the tribe regime.