Saudi Arabia Sees Oil Possibly Hitting $180 a Barrel but Is Wary of Soaring Prices

[Financial News] As signs grow that the energy supply disruption caused by the war involving the Islamic Republic of Iran (Iran) could drag on, the Kingdom of Saudi Arabia (KSA), the world’s largest oil producer, is facing a deepening dilemma.
On the 19th (local time), The Wall Street Journal (WSJ) reported that Saudi oil authorities are focused on forecasting how high prices could climb during the current conflict, leaving open the possibility that crude could surpass $180 a barrel and launching a detailed analysis.
According to officials at KSA’s oil authority, if the Strait of Hormuz remains blocked and energy facilities continue to be attacked through the end of April, the price of Brent Crude Oil is expected to rise above $180 per barrel.
Oil prices have already surged about 50% since the conflict began on February 28.
This week, retaliatory strikes by Iran on the Ras Laffan Energy Hub in the State of Qatar and on facilities in Yanbu in KSA have pushed supply concerns to a peak.
Prices for Oman crude oil futures have already broken through $166.
KSA believes that excessively high oil prices could in fact become a long-term disaster.
If prices exceed $150 a barrel, consumers may permanently change their energy-use habits in response to expensive fuel, for example by working from home more or relying more on public transportation, or they may simply cut back on consumption.
High prices also fuel inflation and interest-rate hikes, which could trigger a global recession and ultimately lead to a sharp drop in oil demand.
KSA is also wary of being branded as a country profiteering from a war it did not start.
Umer Karim, an analyst at the King Faisal Center for Research and Islamic Studies, explained, "Saudi Arabia does not want a rapid spike in prices," adding, "Their ideal equation is moderate price increases combined with a stable market share."
The Saudi Arabian Oil Company (Saudi Aramco) is closely watching market developments ahead of its announcement of the Official Selling Price (OSP) on April 2.
Currently, Saudi light crude sold to Asia via the Yanbu port on the Red Sea is already trading around $125 a barrel. Saudi officials expect that once stockpiles are drawn down starting next week, the physical supply shortage will intensify, pushing prices to settle near $140 and then break through $150 in the second week of April.


jjyoon@fnnews.com Yoon Jae-joon Reporter