News that Saudi King Abdullah bin Abdulaziz Al Saud passed away sent oil prices sharply higher on Friday, but analysts dismissed the move as a knee jerk reaction, noting the recent trend remains intact.
"It's not an extraordinary move in oil prices, given the recent volatility and turmoil in the oil markets," said Michael Levi, senior fellow for energy and the environment at the Council on Foreign Relations (CFR). "Oil prices have dropped 60 percent over the past six months – compared to that, [today's move] is not earth shattering," he said.
Nymex WTI crude oil futures rose as much as 2.5 percent to $47.76 after the news broke but trended back down to $47.25 by mid-day in Asia. Brent crude also rose over 2.5 percent to a high of $49.80 shortly after opening and was recently trading at $49.55.
"It's just the markets pricing in any potential uncertainty over the succession. Prices will settle back down: current levels may hold for a couple of weeks, or whenever the new king comes out and confirms the current policy will be continued," said Phillip Futures investment analyst Daniel Ang.
Uncertainty tends to fuel speculation, which in turn drives up prices, according to Takayuki Nogami, senior economist at government-run Japan Oil, Gas and Metals National Corporation (JOGMEC). He believes prices will trend back down once the markets digest the news; the fundamentals of the oil markets – over-supply in a slowing global economy – won't change, he said.