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The possibility of an immediate oil crisis has seemingly been averted as a result of Saudi Arabia’s assurances that an embargo on Iranian oil will not disrupt the global oil supply. Brent oil prices dropped 1 percent on Tuesday after the Organization of the Petroleum Exporting Countries’ largest oil producer reaffirmed its plans to fill any shortages brought about by bans on Iranian crude.
Saudi Oil Minister Ali al-Naimi said at a press conference on Tuesday that the country was prepared to raise oil output to 12.5 million barrels per day, if needed. “I want to assure you that there is no shortage of supply in the market,” Naimi said in Doha, Qatar. “We are ready and willing to put more oil on the market, but you need a buyer.”
Impending Western sanctions on Iran, coupled with Iran’s threats to further cut of supplies by blocking access to the Strait of Hormuz, through which roughly one-fifth of the world’s oil must travel, have been sending crude oil prices above $120 a barrel. On Tuesday, brent crude fell $1.56 to $124.15 a barrel at 10:59 a.m. EDT. U.S. crude fell $1.67 to $106.42 a barrel.
U.S. Treasury Secretary Timothy Geithner welcomed the Saudi comments. “I want to welcome very much the statements made by the Saudi authorities over the last couple of days that they will take further action to increase the supply of oil in global markets,” Geithner told a House of Representatives Financial Services Committee hearing.
Kuwait also calmed some fears by announcing that Iran had assured them that the Strait of Hormuz would not be shut down. Almost 35 percent of the world’s crude sea shipments pass through the strait that connects the Arabian Peninsula and the Persian Gulf.
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