WASHINGTON – U.S. President Barack Obama spoke with Saudi Arabia’s King Abdullah on Thursday amid concerns about escalating violence in Syria and plans to widen sanctions on Iran.
The White House gave no details of the conversation, but the telephone discussion came as the Organization of the Petroleum Exporting Countries agreed to hold production limits – despite an initial Saudi suggestion that OPEC may need to hike output later this year.
Washington is watching the oil markets closely and is also concerned about escalating violence in Syria, where Saudi Arabia has been an outspoken supporter of the opposition, which is fighting the government of Syrian President Bashar al-Assad.
The call also came two weeks before tough new U.S. sanctions on oil transactions with Iran come into force and before the 27-country EU plans to ban shipments from Iran, which the West believes is trying to build nuclear weapons.
“The two leaders reaffirmed the strong and enduring bilateral relationship between the United States and Saudi Arabia, and discussed a range of issues of mutual interest as part of their ongoing consultations,” the White House said in a short statement, which officials declined to expand upon.
Some analysts say the sanctions on Iran could boost global oil prices next month after they fell steeply this spring.
Last month at a meeting Obama hosted at Camp David, the Group of Eight nations signaled their readiness to tap into emergency oil stockpiles if the sanctions threaten to strain supplies.
A Washington-based oil expert, who did not have direct knowledge about Thursday’s call, said Obama likely spoke with King Abdullah about potential collective action by consumer countries in the International Energy Agency to tap oil reserves should tensions over Iran rise and oil prices spike.
“He probably wanted to check in on it and get the King’s blessing or at least commitment not to undo,” any move by consumer countries to tap reserves, the expert said.
Barring an unexpected last-minute deal to relax EU sanctions, the Europe-based Protection and Indemnity clubs that cover 95 percent of the world’s oil tankers will be unable to insure vessels carrying Iranian crude from July 1.
Analysts say this could blossom into one of the more troubling aspects of the Iran sanctions for oil markets.
Analysts say the insurance gap could cut Iran’s oil shipments by even more than the 25 percent they have fallen already due to sanctions. If that happens, oil prices could reverse course and rise again.
Obama has cited high gasoline prices as one of the headwinds holding back the U.S. economy, although energy costs have eased from levels earlier in the year.
Saudi Arabia has played a role in taking the steam out of the oil market, pumping crude at 10.1 million barrels per day in recent months, the highest level in decades, which has helped push U.S. oil prices down by about $20 to about $84 a barrel.
The price drop has troubled Saudi Arabia’s fellow OPEC members Iran and Iraq, who are urging the kingdom to cut production.