ISTANBUL
Saudi oil officials are urgently modeling how far crude prices could rise if the hostilities centered around Iran and the resulting supply disruptions continue, and the outlook is causing alarm, The Wall Street Journal reported on Thursday.
According to several officials in the Gulf’s largest oil producer, their baseline scenario sees prices climbing above $180 a barrel if the disruption lasts through late April.
Although such a surge might appear to benefit a country still heavily dependent on oil income, Saudi officials view it as a serious risk.
Extremely high prices could drive consumers to cut back on oil use in ways that last beyond the crisis, or even push the global economy into recession, weakening demand further.
It could also leave Saudi Arabia looking as though it is profiting from a conflict it did not initiate.
"Saudi Arabia generally does not like too-rapid increases in oil, because that then creates long-term market instability,” an analyst of Saudi foreign policy and geopolitics with the King Faisal Center for Research and Islamic Studies told the paper.
"For Saudis, the ideal equation is a relatively modest increase in prices while their market share remains stable," said Umar Karim.
Saudi Aramco, the state-run energy giant responsible for the kingdom’s oil production, sales, and pricing, declined to comment.
The attacks pushed benchmark Brent crude futures up to $119 a barrel before prices pulled back on Thursday.
Brent’s record high remains $146.08 a barrel, reached in July 2008.
Modelers looking to gauge future prices
"$200 a barrel is not outside the realms of possibility in 2026," an expert at energy consulting firm Wood Mackenzie said.
Futures linked to Oman crude, a less liquid benchmark that tends to respond more quickly to regional supply shocks, surged above $166 a barrel. Oman crude serves as a pricing reference for much of the oil sold by Middle Eastern producers, including Saudi Arabia, with physical cargoes priced at a fixed differential to a benchmark that moves daily with the market.
According to oil officials, some Saudi customers have grown uneasy about relying on the Oman benchmark because of its sharp volatility. Aramco, however, has maintained that the benchmark accurately reflects current supply conditions.
The conflict has already taken millions of barrels off the global market, helping drive oil prices up roughly 50% since the war began on Feb. 28.
At Saudi Aramco, market modelers are now working to determine where prices are headed ahead of the company’s April 2 release of official selling prices. Their calculations draw on several inputs, including feedback on customer demand from the teams responsible for oil sales.