Gulf Arab nations are prepared to offset any potential loss of Iranian oil in the world market, a senior Saudi oil official said as Iranian officials stepped up their rhetoric Wednesday about shutting off a key supply route. The remarks from the world's largest oil producer came after Iran's vice president on Tuesday warned his country was ready to close the Strait of Hormuz — a vital waterway through which a sixth of the world's oil flows — if Western nations impose sanctions on its oil shipments. A closure of the strait could temporarily cut off some oil supplies and force shippers to take longer, more expensive routes that would drive oil prices higher. It also potentially opens the door for a military confrontation with Iran that would further rattle global oil markets. The oil-rich kingdom is widely seen as the only producer able to offset production losses elsewhere. But others would have to also boost their output to accommodate a loss of exports from Iran, which is the world's fourth largest oil producer. Gulf Arab oil ministers, who met in Cairo on Dec. 24, declined to comment on whether they were eying alternative routes for oil in the case that Iran closes off the Strait of Hormuz. The ministers had gathered for a meeting of the Organization of Arab Petroleum Exporting Countries. OPEC, of which both Iran and Saudi Arabia are members, agreed on Dec. 14 to set its output ceiling at about 30 million barrels per day — in line with the bloc's current production.
