Oil jumped to its highest in over two years yesterday as Saudi Arabia’s crown prince cemented his power through a crackdown on corruption, while world shares eased a notch and major currencies traded in tight ranges.
Oil prices reached their highest since July 2015 as Mohammed bin Salman’s purge led to arrests of royals, ministers and investors including prominent billionaire investor Alwaleed bin Talal.
The news stirred concerns of Middle Eastern money pulling out of global financial markets. A weekend call by China’s central bank governor for tougher financial regulation also hit investor sentiment.
Brent futures were up over half a per cent at $62.49 a barrel. US crude added half a per cent to $55.91. The MSCI world equity index, which tracks shares in 47 countries was 0.1 per cent lower.
European shares turned flat after falling in early deals on weaker trading in Asia and earnings disappointments. The pan-European STOXX 600 was 0.1 per cent lower. Saudi Arabia’s own stock market fell over 1.5 per cent.
Shares in French hotel group Accor fell as much as 1.7 per cent at the open, the biggest of the CAC 40 fallers, after its third biggest shareholder Prince Alwaleed bin Talal was arrested in the Saudi Arabian crackdown.
Prince Alwaleed, a nephew of the king and owner of investment firm Kingdom Holding, invests in firms such as Citigroup and Twitter.
He was among 11 princes, four ministers and tens of former ministers detained, three senior officials told Reuters on Sunday.
“Mohammed bin Salman’s accumulation of power runs the risk of prompting the Kingdom to shift further away from consensus-based policymaking,” said Jason Tuvey, Middle East economist at Capital Economics.
“The big risk here is of a backlash against MbS from these elites that undermines his authority and raises the Saudi risk premium.”
Prince Mohammed’s reforms include a plan to list parts of giant state-owned oil company Saudi Aramco next year, and a higher oil prices is seen as beneficial for the market capitalisation of the future listed company.
Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.2 per cent to drift away from Friday’s top of 557.9, the highest since November 2007.
South Korea’s KOSPI, which hit a record high last week, skidded 0.6 per cent early on before paring losses to 0.3 per cent.
The dollar was little changed after investors took profits on its best weekly performance this year, with wariness about the status of the US economy and tax reform plans setting the tone.
It briefly popped to a eight-month high against the Japanese yen in Asian trades but, with last week’s US jobs data having been underwhelming, traders were a bit more cautious.