Based on the e-mail notes and comments sent, it sounds like most saw this story on CNBC or read it on the internet: Prince says Saudi will not let oil rise above $100/bbl, when the discussion regarding the Iranians closing the strait came up.
Two points: first, in the very recent past, WTI spot price was above $100/bbl (on January 4, 2012, the high for WTI was $103.90) -- just barely, but technically ...
Second, when did Saudi start pricing their oil against the WTI price? It's my understanding that the price of Saudi oil correlates closely with Brent, not WTI. Brent, of course, is well above $100, today about $116.
So, Saudi oil, Brent or WTI? Who's on first, what's on second? The prince also said the entire Middle East needs to be nuclear free, stating that Israel needs to give up its nuclear weapons also (Israel, by the way, has never said it has a nuclear program). Like that's going to happen.
Beyond quibbling over who's on first, what's on second, the whole interview lacked credibility. In January, 2012, Saudi Arabia set the price target for oil at $100 (again, WTI, Brent?), implying that was the floor. So, if that's the floor, and today's prince says the ceiling is $100, that's not much of a spread. Zero, in fact.
Further, we've been through this exercise before. During the recent Libyan conflict when somewhere between one-half million bbls of Libyan oil and 2 million bbls were taken off the market, Saudi said it would make up the difference. Many of us opined that Saudi can't easily make up the difference, and, in fact, there is little evidence that Saudi increased production significantly during the Libyan conflict.
Besides, the whole discussion was idle rambling: the Iranians are not going to shut the strait. I was going to update the poll with a new question, but it appears it may be relevant for a few more weeks.
I take the prince's comments with a grain of salt. Or perhaps with a drop of oil.
