Oil could hit $200-$300 on Saudi unrest, former minister says

$300 a barrel if the world’s top crude exporter Saudi Arabia is

hit by serious political unrest, former Saudi oil minister

Sheikh Zaki Yamani said on Tuesday.

Yamani said he saw no immediate sign of further trouble

following protests last month calling for political reforms but

said that underlying discontent remained unresolved.

“If something happens in Saudi Arabia it will go to $200 to

$300. I don’t expect this for the time being, but who would have

expected Tunisia?” Yamani said on the sidelines of a

conference of the Centre for Global Energy Studies (CGES) which

he chairs.

“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,” he said in a speech.

Saudi King Abdullah offered $93bn in handouts in March

in an effort to stave off unrest rocking the Arab world.

So far, demonstrations in the Kingdom have been small in

scale and police were able to easily disperse a Shi’ite protest

in the oil-producing eastern province last month.

But Yamani said that the reluctance of people to participate

in popular protests was merely concealing underlying discontent.

“Some people relax about the situation in Saudi Arabia

because the Saudi Islamic brand prohibits people to go to the

street and to talk,” he said in a speech.

Oil traded at two-and-a-half-year highs above $121 a barrel

on Tuesday. Libya’s rebellion has shut its oil exports,

stoking fears of disruptions in other major producers.

Yamani, responsible for Saudi oil policy from 1962-1986,

famously predicted in 1990 that crude, near $20 at the time,

could rise to $100 a barrel if Iraq’s invasion of Kuwait led to

war.

In the event, oil peaked at just $41 because Saudi oilfields

escaped damage in the first Gulf War and it was another 18 years

until oil finally broke the $100 mark.

While some analysts at the CGES conference were sceptical

that protests will break out in Saudi on the same scale as Egypt

or Libya, Jaafar Al Taie, managing director of Manaar Energy

Consulting, said political change in the kingdom was inevitable.

“I don’t think that what the King is doing now is sufficient

to prevent an uprising. Saudi Arabia is a time bomb, but one

that is constantly being reset,” said Al Taie, whose firm

advises foreign oil firms operating in the region.

Saudi Arabia is the effective leader of the Organization of

Petroleum Exporting Countries and the only country with any

significant spare production capacity.

Riyadh has lifted output to replace some of the lost Libyan

production but many traders and analysts doubt its potential to

expand output further.

Yamani said it was struggling to quickly get extra volumes

of a new grade of the low-sulphur low-density “sweet” crude

required by European refiners missing Libyan oil to the market.

“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.”

Leo Drollas, deputy executive director at the CGES, said the

kingdom had provided over half or 550,000 barrels per day of the

extra barrels pumped by Gulf countries to replace lost Libyan

supplies. Kuwait and the UAE have also contributed additional

output.