OGJ Oil Diplomacy Editor
LOS ANGELES, Apr. 5 -- Fears of rocketing oil prices were stoked when former Saudi oil minister Sheikh Yamani told a conference Apr. 5 that serious unrest in his homeland could push oil prices as high as $300/bbl.
“If something happens in Saudi Arabia it will go to $200 to $300[/bbl]. I don't expect this for the time being, but who would have expected Tunisia?” said Yamani at a conference at the London-based Center for Global Energy Studies (CGES).
"The political events that took place are there, and we don't expect them to finish. I think there are some surprises on the horizon," said Yamani, adding that underlying discontent remained unresolved in the Middle Eastern nation.
"Some people relax about the situation in Saudi Arabia because the Saudi Islamic brand prohibits people to go to the street and to talk," said Yamani, referring to the reluctance of people to participate in popular protests.
“Saudi Arabia is a time bomb, but one that is constantly being reset," said Jaafar Al Taie, managing director of Manaar Energy Consulting, in reference to recent spending by Saudi Arabia’s King Abdullah to defuse potential trouble at home.
"I don't think that what the King is doing now is sufficient to prevent an uprising,” said Al Taie, whose firm advises foreign oil firms operating in the region.
Saudi Arabia, long known as the swing producer within the Organization of Petroleum Exporting Countries, has increased its output to replace some of the production lost due to the outbreak of civil war in Libya. But many traders and analysts—Yamani among them—doubt the Kingdom’s potential to expand output further.
According to Yamani, Saudi Arabia is struggling to provide European refiners with extra volumes of a new grade of the low-sulfur, low-density sweet crude to replace missing Libyan production.
"It is not that easy when there is an interruption of the supply in oil in Libya…. We don't forget that Libyan oil is very light and it's a short-haul. There is a replacement, but not without difficulties," Yamani said.
The CGES conference came just ahead of a meeting scheduled between Saudi Arabia’s Minister of Petroleum and Mineral Resources Ali I. Al-Naimi and the UK’s Energy and Climate Change Secretary Chris Huhne.
“With oil prices at more than $115/bbl there could be no more important time to be in Saudi Arabia, whose response to events in recent months has been crucial for keeping the market supplied to meet global demand,” said Huhne ahead of his meeting with Al-Naimi.
“There is no shortage of supply, and yet the price has remained high. International energy markets should understand that the current price of oil does not reflect the realities of supply and demand,” Huhne said.
The sterling price of Brent crude hit an all-time high on Apr. 4, rising to $120.63/bbl, the highest since August 2008. However, the pound's 17% fall against the dollar over the past two years has pushed the sterling price to a record £74.60/bbl.
Contact Eric Watkins at email@example.com.
Yamani: Oil could reach $300/bbl over unrest in Saudi Arabia