Consuming nations won a new pledge from OPEC leader Saudi Arabia on Wednesday to boost oil supplies to help control prices and protect the global economy from any loss of Iranian crude due to potential sanctions.
Oil prices have climbed to $127 a barrel this year, just $20 short of their all-time high, as tighter Western sanctions on Iran threaten to choke off the country's exports.
High oil prices have prompted worries about their impact on the global economy, creating a major headache for politicians around the world including US President Barack Obama, who faces public anger over high gasoline prices during an election year.
Washington has urged ally Saudi Arabia to cover potential shortages when new US and European Union sanctions are expected to reduce Iranian oil exports from July.
On Wednesday, veteran Saudi Oil Minister Ali al-Naimi told the International Energy Forum, a major gathering of producer and consumer nations, that the world's largest oil exporter stood ready to fill any supply gap.
'Today the oil market is generally balanced and there is ample production and refining capacity... Saudi Arabia and others remain poised to make good any shortfalls - perceived or real - in crude oil supply,' Naimi said in a speech, made available to reporters.
The statement appeared to differ from previous comments by Naimi, who has repeatedly said the kingdom was prepared to raise production only if it saw increased demand from customers.
Naimi faced a flurry of calls for additional supply from consuming nations.
'We think the markets are tight. Therefore, we think there is a need for more production,' said US Deputy Energy Secretary Daniel Poneman. 'Oil prices at current levels are so high that it's not consistent with a sustained economic recovery.'
British energy minister Charles Hendry took things a step further: 'What we are keen to do is to encourage those with spare capacity to produce more,' he told reporters. 'We do want to see the prices come down.'
But both Poneman and the head of the energy agency for industrialised nations, the International Energy Agency, Maria van der Hoeven, said global spare capacity was tight, making it hard to protect the market against supply shortages.
Saudi Arabia is the only producer with spare capacity at the moment and oil importers will rely on Riyadh to fill the gap should Iranian output and exports drop.
Iran produces below 3.5 million barrels per day and exports around 2.2 million bpd to world markets.
Iran Oil Minister Rostam Ghasemi said Iranian oil exports remain unchanged from 2011 even after oil majors Total and Shell stopped buying crude as other customers stepped in.
Saudi Arabia, already running close to record highs of about 10 million bpd, says it has the capacity to increase production to 12.5 million bpd.
But such a move would fully erase the crucial supply cushion and may provoke an even higher spike in prices.
'There is a thin cushion, so there is concern about supply,' said van der Hoeven.
Poneman said spare capacity of 2.5 million bpd was at least 1 million below reasonably comfortable levels seen in 2008-2011.
'Nobody wants to see a repeat of 2008, where you had a high spike leading to global demand destruction,' he said.
In Washington, surging gasoline prices have become a top issue leading up to national elections in November.
Republicans have argued Obama should take steps to increase US oil production before asking Saudi Arabia for more, while Democrats have blamed speculators for part of the run-up.
'The number one thing jacking up prices right now is the fear in the markets that Iran will shut off its production,' said Senator Charles Schumer in a speech on the Senate floor.
Schumer, the third-ranking Democrat in the US Senate, had urged the Obama administration to press the Saudis to boost production, and said the announcement could help reduce oil prices in the short term.
Although the stand-off between the West and Iran is the key worry for oil markets at the moment, the tensions appeared to be a taboo subject at the forum.
Saudi Arabia is also keen to minimise tensions with Iran, which the West accuses of developing a nuclear weapon. Tehran denies the accusations and says its atomic programme is peaceful.
Neither Naimi nor OPEC Secretary General Abdalla al-Badri mentioned the tensions in their speeches, and Ghasemi only vaguely alluded to the stand-off.
'Exerting unilateral economic constraints of political instigations is a threat, which jeopardises free trade and continuity of oil supply in the world,' he said.