The impact on the oil market of the breach in diplomatic relations between Saudi Arabia and Iran will be temporary, and the surplus of crude in the market is a bigger threat, Iran's national representative to OPEC was quoted as saying.
"The effect of this political tension on the oil market will be short-term and the market will calm down when it sees the oil supply is secured," Mehdi Asali said, according to the oil ministry's news agency Shana.
He called oversupply the "biggest threat" to the market and said countries which had raised their crude production when international economic sanctions on Iran were imposed were the ones which should now cut back to stabilise the market.
Brent crude oil prices retreated almost 1 percent to near 11-year lows on Wednesday as concern over growing supply and rising inventory levels outweighed the tensions between the two key Middle East producers.
Saudi Arabia and some other Sunni Arab countries have broken most ties with Iran after protesters in Tehran stormed the Saudi embassy in protest over Riyadh's execution of a Shi'ite Muslim cleric.