Oil pares gains as Saudi oil policy set to continue

By Himanshu Ojha

LONDON (Reuters) - Oil prices rose on Friday after the death of Saudi Arabia's king added to the uncertainty in global oil markets, although the new ruler indicated immediately there would be no policy change.

Brent crude rose to a high of $49.80, up $1.28 a barrel, before easing to $49.25 by 1335 GMT. U.S. light crude oil was at $46.38, up 7 cents.

King Abdullah bin Abdulaziz died early on Friday and his brother Salman became king of the world's top oil exporter.

Salman named his half-brother Muqrin as heir and nephew Mohammed bin Nayef, 55, as Deputy Crown Prince, moving to forestall any succession crisis at a moment when Saudi Arabia faces unprecedented turmoil on its borders.

Saudi state television said King Salman intended to keep oil minister Ali al-Naimi in place, suggesting the country's oil policy would remain unchanged.

Hans van Cleef, senior energy economist with ABN Amro, said the initial rally after King Abdullah's death was due to uncertainty over succession and Saudi oil policy.

"There was only a spike in prices over these tensions and they eased afterwards," he said.

After seeing strong volatility and price falls earlier in January, oil markets have moved little this week, with Brent prices range-bound between $47.78 and $50.45 a barrel.

The new Saudi king is expected to continue an OPEC policy of keeping oil output steady to protect the cartel's market share from rival producers.

Abdullah's death comes amid some of the biggest shifts in oil markets in decades. Oil prices have fallen by almost 60 percent since peaking last June as soaring supplies of shale oil from North America have coincided with cooling demand.

Booming U.S. production has turned the United States from the world's biggest oil importer into one of the top producers, pumping out over 9 million barrels per day.

Data from the Energy Information Administration on Thursday showed the biggest build in U.S. crude inventory in at least 14 years, driving Brent and WTI prices apart.

To combat soaring output and falling prices, many oil exporters, such as Venezuela, wanted the 12-member Organization of the Petroleum Exporting Countries (OPEC) to cut output in order to support prices and revenues.

Yet, led by Saudi Arabia, OPEC announced last November it would keep output steady at 30 million barrels per day.

(Additional reporting by Robert Gibbons in New York and Henning Gloystein and Florence Tan in Singapore; Editing by David Evans)