The Pope also plans to meet the Dalai Lama, the Tibetan spiritual leader, in December, Associated Press reported.
The Vatican and Saudi Arabia currently do not have diplomatic relations. It is illegal to practice Christianity in the Kingdom and the strict interpretation of Islam also rejects the possibility of diplomatic relations with a Christian entity.
This interpretation would prohibit a Vatican embassy in Saudi Arabia on the grounds it would be equivalent to raising the cross inside the site of Islam's holiest places.
The Vatican has repeatedly stressed its demands for "reciprocity" - meaning that countries such as Saudi Arabia should ease limits on worship by Christians and other non-Muslims.
Pope to meet Dalai Lama
An unidentified Vatican source has said the meeting between the Holy Father and the Dalai Lama is planned for Dec. 13.
Benedict met with the leader a year ago, but the Vatican insisted it was a "private" visit and provided no details.
The meeting is likely to add a chill to the Vatican's difficult relations with China, which forced its Catholics to cut ties with the Vatican in 1951, shortly after the Communist Party took power.
Pope to Meet Saudi Monarch, (31/10/07)
LINKS (not necessarily endorsed by Church Resources)
The Dalai Lama of Tibet
Saudi Arabia (Wikipedia)
Pope hopes to expand Vatican diplomacy (CathNews, 13/05/05)
Vatican gives Dalai Lama visit low profile (CathNews, 28/11/03)
Dalai Lama to visit Pope tomorrow (CathNews, 26/11/03)
Dalai Lama urges Christians not to convert to Buddhism (CathNews, 24/11/05)
1 Nov 2007