Assuming the USA sanctions are effective in curbing Iran's crude exports, Saudi Arabia and its OPEC allies will have to raise their production to make up the shortfall, or risk being blamed for a further rise in motoring costs.
Saudi Arabia is monitoring the impact of the USA withdrawal from the Iran nuclear deal on oil supplies and is ready to offset any potential shortage but it will not act alone to fill in the gap, an OPEC source familiar with the kingdom's oil thinking said on Wednesday.
OPEC's No.1 producer, Saudi Arabia, has vowed to continue supporting the stability of oil markets and may lead joint efforts to offset the impacts of potential supply shortages due to the reinstated sanctions on Iran, Kallanish Energy reports.
Iran is the third-biggest producer of crude oil within oil cartel Opec, after Saudi Arabia and Iraq.
Secretary of State Mike Pompeo shakes hands with his Saudi counterpart Adel al-Jubeir during a news conference, in Riyadh, Saudi Arabia, on April 29.
Meanwhile, European allies sought to salvage the global nuclear pact with Iran.
As a practical matter, only Saudi Arabia, the United Arab Emirates, Kuwait, Russia and the United States have the ability to raise production and exports in the short term.
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The restoration of sanctions on Iran-the world's fifth-largest oil exporter-may have implications for the market balance, the International Energy Agency (IEA) said in a statement on Wednesday, adding that it is closely following the situation.
U.S. President Donald Trump's threat of sanctions against buyers of Iranian crude risks being batted back by some adversaries. And many conservatives believe the Obama administration's Iran deal did far too little to forestall Iran's nuclear dreams. The country is now building a nuclear power program for energy purposes, although al-Jubeir indicated that it could be expanded to include an arsenal of weapons.
Middle East analyst James Dorsey, a senior fellow at Singapore's S. Rajaratnam School of International Studies, said any economic showdown will force Gulf states to weigh their responses.
Riyadh, which leads a regional coalition that intervened in Yemen's civil war to fight the Houthis, accuses Iran of supplying the militia with ballistic missiles.
Both the Houthi movement and Iran deny any military con nection-but are politically aligned in regional affairs.
"Iran has gotten credit for a war that it hasn't really been involved in except giving logistical support to the rebels".