Oil prices could surge to all-time highs if the U.S. imposes economic sanctions against Saudi Arabia, according to an opinion piece written by the general manager of Saudi Arabia-based Al Arabiya television.
The warning from Al Arabiya’s Turki Aldakhil comes amid heightened tensions between Saudi Arabia and the West, after journalist Jamal Khashoggi — a U.S. resident and prominent critic of Crown Prince Mohammed bin Salman — disappeared after entering the Saudi consulate in Istanbul on Oct. 2.
Turkish authorities claim Khashoggi was murdered and his body removed. Saudi Arabia has fiercely denied that.
“If U.S. sanctions are imposed on Saudi Arabia, we will be facing an economic disaster that would rock the entire world,” Aldakhil wrote on Sunday.
“It would lead to Saudi Arabia’s failure to commit to producing 7.5 million barrels. If the price of oil reaching $80 angered President Trump, no one should rule out the price jumping to $100, or $200, or even double that figure.”
International benchmark Brent crude traded at around $81.43 Monday morning, up around 1.2 percent, while U.S. West Texas Intermediate (WTI) stood at $72.12, slightly more than 1 percent higher.
Expensive energy
Energy watchers are closely monitoring Brent, which has pulled back from recent multiyear highs but remains firmly established above $80 a barrel.
So far this year, the price of oil has surged more than 25 percent, prompting some investors to bet that a return to triple-digits could be just around the corner.
Meanwhile, the U.S. is banking on Saudi Arabia to curtail soaring energy prices and help offset lost Iranian oil supply. But, in theory, an escalation of tensions in the Middle East could send prices sharply higher.
The International Energy Agency (IEA) is already concerned rising energy prices could soon pose a threat to global economic growth, saying its position is “expensive energy is back.”
President Donald Trump has repeatedly blamed OPEC kingpin Saudi Arabia for rising gasoline costs, as prices continue to head in the wrong direction for American consumers with midterms coming up in less than four weeks’ time.
Saudi stocks tumble
On Sunday, Trump threatened “severe punishment” against Saudi Arabia if it turns out Khashoggi was killed in the consulate, though he also cautioned Washington would be “punishing” itself if it scrapped any military sales to Riyadh.
Meanwhile, the governments of the U.K., France and Germany all called for a “credible investigation to establish the truth about what happened” on Sunday. “And — if relevant — to identify those bearing responsibility for the disappearance of Jamal Khashoggi, and ensure that they are held to account.”
In response, Saudi Arabia said it would retaliate to possible economic sanctions taken by other states over the case of Khashoggi.
For the moment, suspicions about Saudi Arabia’s role in Khashoggi’s disappearance have tainted the reformist image carefully cultivated by Crown Prince Mohammed.
Shares in Saudi Arabia plunged on Sunday, amid growing fears of global fallout. The country’s main stock market index in Riyadh — the Tadawul — fell as much as 7 percent at one stage as billions of dollars were wiped off the value of leading Saudi companies.
The index recovered some ground later in the trading day to close around 3.5 percent lower.