Saudi Arabia mourned on Sunday the death of Crown Prince Sultan, as King Abdullah prepared to nominate his new heir and choose a  new occupant of the key defence minister's job.

With much of the rest of the Middle East in turmoil, US Defence Secretary Leon Panetta expressed confidence in Riyadh's ability to stage an effective transition in the area of defence after the death of the crown prince.

Prince Sultan, who had been heir to the Saudi king since 2006 and defence and aviation minister since 1962, died of colon cancer in New York on Saturday.

While most analysts expect the veteran Interior Minister Prince Nayef to become crown prince, there is less certainty about the defence role, a key post in a country that uses multi-billion dollar arms deals to cement relations with top allies.

In making the appointments, King Abdullah must maintain a delicate balance of power in a royal family that has thousands of members, dozens of branches and dominates Saudi Arabia's government, armed forces and business.

'Balance is always the concern of kings,' said Khaled al-Dakhil, a political science professor in Riyadh. 'It's to keep the balance within the family at all levels.'

Speaking in Indonesia, Panetta expressed confidence over the future of Saudi defence policy. 'I believe that we can have an effective transition in Saudi with regards to the defense area,' he said. 'We've been able to have these transitions before. I think I feel confident that we can go through this transition as we move to a new defense minister.'

The changes to top Saudi personnel might prompt King Abdullah to undertake the first major government reshuffle of his reign, an event that has long prompted speculation.

However, analysts said he might prefer to wait to avoid any perception that changes were being made under pressure. With Sultan's funeral scheduled for Tuesday in Riyadh, the government is preparing for an influx of foreign dignitaries and leaders, reflecting Sultan's status as a major figure in Saudi foreign and defence policy over several decades.

State-owned news channel Ekhbariya devoted most of its coverage on Sunday to the death, carrying a photograph of Sultan praying as it broadcast interviews with commentators and black-and-white footage of him inspecting Saudi troops in the 1960s.

However, businesses and government buildings remained open in the absence of a formal mourning period, and only a few small state-run events, including exhibitions and a tourism festival, were cancelled.

King Abdullah's appointments this week will determine the direction of Saudi Arabia for years, if not decades, to come as the world's top oil exporter prepares to tackle long-term internal and foreign problems.

He is likely to activate the Allegiance Council he set up in 2006 to regulate the kingdom's opaque system of succession. The council does not legally have to come into force until after Abdullah's death, but analysts in the kingdom say he is unlikely to bypass the body by simply appointing the new crown prince himself.

'Considering the fact that the Crown Prince died at this time, with the situation in the Middle East and the Arab world in turmoil now, it would be positive to activate the council and give it a chance to choose the new crown prince,' said Dakhil.

The appointment of a new defence minister is key in ensuring continued balance between different wings of the family. The job also entails responsibility for major defence purchases that Riyadh has used to boost its relations with top allies including the US, UK and France.

Leadership of the kingdom's armed forces also delivers a powerbase to whichever prince is in charge, making it a pivotal position.      Prince Sultan's son, Prince Khaled bin Sultan, is now the deputy defence minister and has for many years been seen as a strong candidate to replace his father as minister one day.

However, analysts said it was not certain he would be appointed to the role by King Abdullah. Saudi newspapers carried full-page condolence messages from princes and Saudi companies and devoted pages of coverage to Sultan's death.-Reuters