Saudi rejects call for oil embargo over Israel

NEW YORK (Reuters) - Middle East oil producing nations will reject Iran's call for Muslim countries to halt crude supplies to Israel's backers over the fighting in Gaza, Saudi Arabia's foreign minister said on Wednesday.

"The oil producers who need their income ... are not going to do that," Saudi Foreign Minister Prince Saud Al-Faisal told reporters at a news conference.

"The use of oil, especially at this time, is an idea that is at least past its worth," he said. "The important thing, oil is not a weapon. You can't reverse a conflict by using oil."

An Iranian military commander called on Islamic countries to cut oil exports to Israel's supporters in response to the Jewish state's offensive in Gaza, Tehran's official IRNA news agency reported on Sunday.

IRNA said the commander described oil as a commodity that could put pressure on Israel's European and American backers in the "unequal war" faced by Palestinians in the coastal strip.

Iran, which often launches verbal diatribes against the United States and Israel, is the world's fourth-largest oil producer and a leading member of the Organization of the Petroleum Exporting Countries (OPEC).

The Saudi foreign minister -- whose country is OPEC's top producer and the world's largest petroleum exporter -- said the oil producers would be shooting themselves in the foot by heeding Tehran's call to cut supplies to Israel's backers, a move which he said would not help end any such conflict.

"How can you do that? You stop producing oil in order to put pressure on people and you suffer as much as anybody else suffers," Prince Saud noted.

Oil producers have seen their revenues dwindle in recent months as oil prices have collapsed from a peak of over $147 per barrel in July to about $32 in December.

The oil producers "need their abilities to build their countries from this resource (oil)," Prince Saud said.

"If they are going to make themselves ready to face any actions against them, they need that resource to build their capabilities," he added.

Asked if Saudi Arabia would contribute to a possible international monitoring force, Prince Saud replied: "If we are asked, we will of course think about it."

The Saudi official's comments followed similar remarks from an OPEC source who on Monday told Reuters that core OPEC oil producers in the Gulf would ignore Iran's call, noting that any such move to cut supplies was "very unlikely".

U.S. crude fell as much as $4, or more than 7 percent, to below $45 a barrel on Wednesday after government oil inventory data showed crude oil and refined products supplies in the United States rose more than expected last week.

Prices had hit a two-week high over $48 a barrel on Monday on concern that Israel's assault on the Gaza strip could involve other Middle East countries that produce a third of the world's crude.

(Writing by Haitham Haddadin and Richard Valdmanis; Editing by David Gregorio)