Oil surged above $64 a barrel to the highest level in two years on Monday after Saudi Arabia’s crackdown on dozens of princes and business tycoons raised concerns about stability and policymaking in the world’s largest crude exporter. The sharp move in Brent crude, the international benchmark, came shortly after Saudi officials warned that they had found “widespread corruption” among the suspects detained in the weekend sweep and threatened to freeze assets of those being held. Brent hit a high of $64.23 a barrel on Monday before settling for the day at $64.27, a rise of $2.20.
This takes its gains since June to more than 40 per cent, a move that is likely to be closely watched by central banks already monitoring rising inflation. US benchmark West Texas Intermediate hit $57.41 a barrel, its highest in two years, before settling the day at $57.35, up $1.71. Crude was on an upward trend even before Saudi Arabia’s crown prince Mohammed bin Salman launched his purge, which has included the detention of billionaire investor Prince Alwaleed bin Talal, whose holdings include stakes in Citigroup, Apple and 21st Century Fox.
The crackdown was widely seen as a move to consolidate Prince Mohammed’s power as next in line to the throne. Saudi Crown Prince launches corruption crackdown Play video Because Saudi Arabia is Opec’s leading member, pumping one in every nine barrels of crude produced globally, political manoeuvring in the kingdom is closely watched by oil traders. “The impact on oil could be significant on the perceived increase in volatility in the kingdom,” said Cyril Widdershoven, at Dutch consultancy Verocy.
Kingdom Holdings, Prince Alwaleed’s investment vehicle, issued a statement saying that the Saudi government had expressed its “full confidence” in the investment firm that manages $12.5bn of assets globally. Employees have told business partners that there is a vacuum of information within Kingdom Holdings, with questions swirling about the fate of the firm’s assets. “Everything is on hold,” said one person close to the company. Unlike oil, shares in listed companies in which Prince Alwaleed holds large stakes were initially unaffected by his detention.