Oil fell to seven-month lows on Wednesday, set for its largest price slide in the first half of any year for the past two decades, as investors discounted evidence of strong compliance by OPEC and non-OPEC producers with a deal to cut global output. As David Pollard reports, there are also concerns about the impact of a change of succession in Saudi Arabia on the oil market.
At 29 years old, Saudi Arabia's deputy crown prince was already meeting heads of state. Now, at 31, an astonishing rise to power appears complete. Mohammed bin Salman not only elevated to crown prince - but also appointed deputy prime minister - whilst retaining control over defence. And oil - as well as Saudi's bid to wean itself away from it. (SOUNDBITE) (English) LCG SENIOR ANALYST, JASPER LAWLER, SAYING: "He's quite hawkish on foreign policy. quite hostile, you could say, towards Iran. And also is in control of this general policy to diversify the Saudi economy away from oil. So, putting all that together, I think it makes the sustainability of the OPEC agreement a bit less likely over the medium term." The sudden announcement put further pressure on crude prices as they fell to seven-month lows on Wednesday. Markets apparently refusing to believe the latest reports on OPEC. That compliance with its deal to cut global output is at its highest level yet. (SOUNDBITE) (English) LCG SENIOR ANALYST, JASPER LAWLER, SAYING: "With the benefit of hindsight, obviously, OPEC needed to go the extra measure. They needed to cut by more, or promised to extend the cuts for longer ... On top of that, there are signs that China's economy is slowing slightly. The US is not firing on all cylinders and so probably the demand is not there either for oil." The downside has rippled through forex markets - oil and commodity-linked currencies like the Australian dollar, the Norwegian crown and the rouble all dragged lower. Traders now braced for the largest price slide in the first half for twenty years. MBS - as he's known - may already be thinking longer-term. As, now, heir apparent to the Saudi throne, the young prince could ultimately rule for many decades to come.