Obama to hear Saudi worries on Iran, discuss oil

By Ulf Laessing

RIYADH (Reuters) - U.S. President Barack Obama is set to discuss with King Abdullah the Arab-Israeli conflict, diplomatic overtures toward Iran and oil prices when he starts a tour to the Middle East and Europe in Riyadh on Wednesday.

Saudi Arabia is the first stop in a tour that will take Obama to Germany, France and Egypt, where he plans to deliver a much-anticipated speech to the Muslim world.

Al Qaeda's second-in-command urged Egyptians on Tuesday to reject Obama's visit, calling him a criminal.

Washington hopes Saudi Arabia will play a moderating role in OPEC and counter price hawks such as Iran after oil prices hit a seventh-month high, threatening prospects of an imminent global economic recovery.

Saudi Arabia and the United States have a near 60-year-old relationship based on guaranteeing oil supplies in return for U.S. protection for the Saudi monarchy.

Obama said on Thursday he would raise the issue of oil prices with King Abdullah and planned to say the big price rises are not in Riyadh's interest.

"The U.S. will be keen for OPEC to ensure that oil prices remain reasonable. Saudi Arabia has played the swing producer role, balancing global growth with desired oil price levels," said Monica Malik, a regional economist at EFG-Hermes.

Saudi Arabia, which has more than one-fifth of global crude reserves, wants to hear how serious Obama is with plans to lower U.S. dependence on Middle East oil and diversify energy resources away from fossil fuels, analysts say.