Oil prices jumped on Friday as news of the death of Saudi Arabia's King Abdullah added to uncertainty in energy markets already facing some of the biggest shifts in decades.
Abdullah died early on Friday and his brother Salman became king, the royal court in the world's top oil exporter and birthplace of Islam said in a statement carried by state television.
Brent crude futures rose to a high of $49.80 a barrel shortly after opening before easing back to $49.52 a barrel by 0533 GMT, up $1. U.S. benchmark WTI crude futures were at $47.11, up 80 cents, slightly below a high of $47.76 hit earlier in the session.
"The fear of the unknown is going to be supportive to crude oil prices," said John Kilduff, partner, Again Capital LLC in New York. "King Abdullah was the architect of the current strategy to keep production high and force out smaller players instead of cutting," he added.
Analysts expect the new king to stick to an OPEC policy of keeping oil output steady to protect the cartel's market share from rival producers.
"The decision by Saudi Arabia to keep pumping oil was made regardless of who the king may be," IHS consultant Victor Shum said.
Oil prices have more than halved since peaking in June last year as soaring supplies clash with cooling demand, due to an economic slowdown in Europe and Asia as well as improvements in energy efficiency, made during times of high prices.
Booming U.S. shale production has turned the United States from the world's biggest oil importer into one of the top producers, producing more than 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. [EIA/S]
To combat soaring output and falling prices, many oil exporters, such as Venezuela, wanted the 13-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.
Brent, which had already dropped to $77 by the time of the OPEC meeting, dropped another quarter over the next month as the market digested the fact OPEC would not come to the rescue.
OPEC's decision not to act, led by Saudi Arabia, was aimed at defending market share against U.S. shale producers as well as other non-OPEC exporters such as Brazil or Russia.