Oil prices recover on Iran threat

LONDON, England -- Crude prices edged higher on Wednesday as Iran's oil minister reiterated that his country would join Iraq in suspending oil exports if it gets the backing of other Muslim producers.

"Our position is very clear and our supreme leader has announced it. We will do everything ... in unanimity with Islamic and Arabic producers,'' Jijan Zanganeh told Reuters in an interview in Seoul, where the minister is meeting with government officials.

Oil prices reached a high of $27 a barrel earlier this week after Iraq said it was freezing exports for 30 days or until Israel ended its military offensive in the West Bank.

But prices slipped back on Tuesday after the world's largest exporter, Saudi Arabia, assured markets that it would provide enough oil to meet global demand.

Also on Tuesday, the American Petroleum Institute said crude oil stocks in the U.S. rose by 4.3 million barrels last week to a three-year high.

However, Brent crude for May delivery gained 12 cents to $26.20 on Wednesday in London after the comments by Iran's Zanganeh.

The Organisation of Petroleum Exporting Countries (OPEC) said there was no need to increase oil output now or at the cartel's June meeting, despite threats to supplies posed by Iraq or the current industrial dispute in Venezuela.

"If we increase production we could suffer a collapse after the resolution of these conflicts," OPEC Secretary-General Ali Rodriguez told a news conference on Wednesday at the cartel's Vienna headquarters.

Meanwhile, the International Energy Agency (IEA) said on Wednesday that global oil demand should rise this spring after declining three quarters in a row, as the U.S. and other industrial countries recover from the economic slowdown.

"Demand contracted more than expected in the first quarter, but is set to resume, growing sooner than previously anticipated," the IEA. "Rising oil prices pose a downside risk to the forecast."

Also on Wednesday, U.S. Treasury Secretary Paul O'Neill said the global economic recovery could continue as long as oil prices remain in their current range.

"It seems to me that the Saudis and the rest of the oil producing community are together on maintaining their stand of a band of prices and doing whatever production it takes to stay in that band,'' O'Neill told reporters after meeting officials of the Organisation for Economic Co-operation and Development in Paris.

"It's an issue we can proceed with, an assumption that things are going to be OK,'' he said.