Extrapolation from Saudi Arabia! If supply disruptions continue until late April, oil prices will soar above $180

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Source: Cailian Press

Cailian Press, March 20 — (Editor: Xiao Xiang) Oil officials in Saudi Arabia are running scenarios: if the Iran war and resulting energy supply disruptions do not end quickly, how high could oil prices go?

And their current predictions are clearly quite concerning!

Several oil officials from this Gulf region’s largest oil producer say their baseline forecast is that if the supply disruption continues into late April, oil prices could soar above $180 per barrel.

While this figure might seem like a windfall for a country still heavily dependent on oil revenue, the current situation still causes some anxiety within Saudi Arabia. Such high oil prices could lead consumers to drastically reduce their oil consumption (possibly for the long term), or trigger an economic recession that dampens demand. Additionally, it could cause Saudi Arabia to be viewed as a profiteer in this war, which was not initiated by itself.

“Saudi Arabia generally does not want oil prices to rise too quickly, as this could lead to long-term market instability,” said Umer Karim, a Saudi foreign policy and geopolitical analyst at the King Faisal Center for Research and Islamic Studies. “For Saudis, the ideal scenario is a moderate increase in oil prices while maintaining market share stability.”

Oil Prices Continue to Surge

This week, attacks on energy facilities by both Iran and Israel have continued to push up oil prices. In retaliation for Israel’s Wednesday attack on Iran’s South Pars gas field, Tehran subsequently attacked facilities at Qatar’s Ras Laffan energy hub and targeted other Gulf infrastructure, including facilities at Yanbu port in Saudi Arabia — the endpoint of the east-west oil pipeline in the Red Sea, which bypasses the Strait of Hormuz.

Iran also continued attacks on ships in the Persian Gulf, maintaining a series of nearly blockade-like assaults on the Strait of Hormuz — a narrow waterway that carries 20% of global oil shipments.

These ongoing attacks caused benchmark Brent crude futures to spike to $119 per barrel on Thursday before pulling back slightly at the close. The all-time high for this contract was $146.08 in July 2008. Previously, energy consultancy Wood Mackenzie analysts stated, “It’s not impossible for oil prices to reach $200 per barrel by 2026.”

While Gulf futures linked to Oman crude have lower liquidity, they tend to reflect local supply disruptions more quickly. On Thursday, Oman crude prices briefly surged above $166 per barrel.

Oman crude is a key benchmark for oil sold by Middle Eastern producers like Saudi Arabia. The physical oil cargoes are priced with a fixed differential to this benchmark, which fluctuates daily based on market conditions.

Saudi oil officials say that due to the volatile nature of this benchmark, some Saudi clients are hesitant to rely on it. However, they note that Saudi Aramco, the state-owned energy giant, insists that this benchmark accurately reflects market supply conditions.

Saudi Arabia Foresees Increasing Supply Shortages

Currently, this war has caused a daily global supply reduction of several million barrels of oil. Since the conflict erupted on February 28, even the relatively less volatile US WTI crude has risen over 40%.

Saudi Aramco’s modeling team needs to assess market trends promptly to set official crude oil prices by April 2. They have compiled various input data, including surveys of sales personnel regarding customer demand.

Saudi officials state that currently, the price of light crude oil sold by Saudi through its Red Sea ports to Asian buyers is about $125 per barrel. They also say that as some extra inventories shipped out before the war are exhausted, physical shortages will worsen next week, pushing prices toward $138–$140.

Saudi officials estimate that by the second week of April, if supply disruptions persist and the Strait of Hormuz remains closed, prices could reach $150, then gradually rise to $165 and $180 over the following weeks.

Global oil traders are also betting on higher prices — although many expectations remain well below Saudi Arabia’s most pessimistic scenarios. Intercontinental Exchange (ICE) data shows that on Wednesday, options markets favored positions betting on Brent futures reaching $130, $140, or $150 next month. Additionally, a smaller but growing number of traders are betting prices could climb even further.

Rebecca Babin, senior energy trader at CIBC Private Wealth, said, “The market is no longer acting as if it’s waiting for the end of the situation at the end of March.” She refers to the war’s end. “I think reaching $150 within a month is not impossible… If we talk about June, I could even see $180.”

Some energy producers are also calculating how high oil prices can go before buyers start cutting back (a phenomenon known as demand destruction). “Usually, when Brent hits $150, people really start calculating costs,” Babin said.