"Can't Drive Next Month?" Oil Prices Could Hit $180 in April, Worst-Case Scenario Warns [US-Iran War]

Wood Mackenzie: "Oil Prices Could Reach $200 per Barrel This Year"

The Wall Street Journal (WSJ) reported on March 19 (local time) that Saudi Arabian oil authorities expect the price of oil to surpass $180 per barrel if supply disruptions caused by the Iran war persist until the end of next month.

The previous day, Israel attacked Iran's largest gas field, South Pars, prompting Iran to retaliate with airstrikes on Qatar's Ras Laffan gas facilities. This has led to a series of clashes targeting energy infrastructure. Additionally, the Strait of Hormuz, through which 20% of the world's oil shipments pass, remains closed. As a result, the price of Brent crude oil futures at one point soared to $119 per barrel on this day. The all-time record high was $146.08 per barrel, set in July 2008.

Saudi Arabia Yanbu Port's Oil Infrastructure. Photo by AFP Yonhap News

Since the outbreak of war between the United States and Israel and Iran on February 28, oil prices have risen by about 50%. Analysts at energy consulting firm Wood Mackenzie said there is a possibility that oil prices could reach $200 per barrel this year.

Saudi Aramco is currently monitoring market trends to announce the official selling price of its crude oil by April 2. At present, Saudi light crude is being sold to Asian buyers at about $125 per barrel via Saudi Arabia's Red Sea ports. According to sources, as storage inventories are depleted, the selling price may rise to $138–$140 per barrel next week.

Saudi officials predict that if the blockade of the Strait of Hormuz continues, oil prices could reach $150 per barrel in the second week of April, then rise further to $165 and even $180 per barrel afterward.

Oil traders are betting that oil prices will surge further, but most forecasts remain below Aramco's worst-case scenario. The most common positions in Brent crude oil futures trading for next month anticipate prices climbing to $130, $140, or $150 per barrel. However, the number of traders betting on even sharper spikes, while still small, is steadily increasing.

Rebecca Babin, Senior Energy Trader at CIBC Private Wealth, said that the market no longer expects the war to end by the end of this month, stating, "I don't think $150 per barrel within a month is out of the question. If we're talking about June, I would confidently say $180 is possible."

An advisor working with Aramco noted that if the cost of crude oil imports surges in countries such as Korea, Europe, and Japan, there will be downward pressure on their currencies. This, in turn, could increase the real burden of energy expenses, drive up inflation and interest rates, and ultimately slow economic growth and demand. This scenario is currently under review.

While the ongoing spike in oil prices may appear to benefit Saudi Arabia, WSJ reported that it is actually a cause for significant concern. If prices surge to this extent, consumers are likely to drastically reduce their use of oil, or an economic recession could occur, leading to weakened oil demand. Babin predicted that if Brent crude oil reaches $150 per barrel, people will restrain their demand. Moreover, there is a burden for Saudi Arabia in that it could be seen as a country profiting from war.

Umer Karim, a Saudi foreign policy and geopolitical analyst at the King Faisal Center for Research and Islamic Studies, said, "Saudi Arabia generally does not welcome a sharp spike in oil prices because it leads to long-term market instability." He added, "The most ideal situation for Saudi Arabia is for oil prices to rise moderately while its market share remains stable."

Saudi national oil company Aramco declined to comment on the matter, according to WSJ.

This content was produced with the assistance of AI translation services.