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. Last Updated: 07/27/2016

Saudis Move to Allay Fears Over Oil

DUBAI, United Arab Emirates -- Saudi Arabia moved Tuesday to assure global markets rattled by Iraq's suspension of oil exports that it will not allow a shortage of crude.

Oil minister Ali al-Naimi was quoted in Saudi newspapers saying that Saudi, the world's biggest oil producer, would ensure global oil supplies.

"I believe there is no threat to the reliability of worldwide oil supplies, and the reliability of Saudi Arabian supplies in particular,'' the Saudi papers quoted al-Naimi as saying.

Oil prices climbed sharply Monday after Iraqi President Saddam Hussein announced Baghdad was suspending oil exports for a month to protest at Israel's incursion into Palestinian areas in the West Bank.

Asked what action Saudi Arabia would take in light of calls from Iraq to join an oil embargo on the West, the Saudi-owned Asharq al-Awsat newspaper quoted him as saying:

"The kingdom's position regarding the reliability of supplies has been announced on more than one occasion and I do not believe that anything could threaten reliability of supplies on the global level.''

"Whatever may be said, we have proven in many previous crises that Saudi Arabia and OPEC are reliable and stable sources of oil supplies,'' Saudi Gazette quoted him as saying.

Iraqi Oil Minister Amir Muhammad al-Rasheed said Monday that Baghdad had asked fellow OPEC member countries to join its campaign, or at least not to raise production after Baghdad announced its suspension on supplies.

OPEC Secretary-General Ali Rodriguez said he had spoken to cartel ministers and they saw no immediate need to raise supplies but would keep a close watch on the market.

And the West's energy watchdog said there was no need for panic over the Iraqi outage.

"It's regrettable, but not a huge volume,'' said IEA Executive Director Robert Priddle. "The market has not reacted sharply to this.''

The Iraqi news sent oil up a dollar a barrel, but after al-Naimi's comments, prices subsided Tuesday with Brent blend crude in midmorning London trade off 62 cents at $26.40 a barrel.

The stoppage comes as Baghdad seeks to rally support in the Arab world against a military strike by the United States, which sees Baghdad as a threat to international security. By supporting the Palestinian cause, Iraq makes it difficult for Arab countries to join any alliance against Saddam.

On the one hand Saudi Arabia will not want to anger Arab public opinion by quickly filling the gap in Iraqi supplies, dulling the impact of Saddam's move, but above all Riyadh needs to underline its status as a reliable source of oil to the West.

"Iraq has put up a picket line and any oil producers in the Arab world seen crossing it would be scab labor,'' said an oil trader at major oil company in London.

The kingdom though wants to be seen as a steady supplier of crude, especially to the United States, its closest political and military ally in the West.

Iraq's halt on nearly 2 million barrels a day in exports in support of Palestinians was well timed to cause supply discomfort in the United States, easily the world's biggest consumer of Iraqi crude oil.

Other OPEC producers can easily cover the Iraqi outage if prices start to run out of control.