Speaking at the Joint Ministerial Monitoring Committee (JMMC) meeting in Abu Dhabi on Sunday, Saudi Arabia's Energy Minister Khalid al-Falih told CNBC's Steve Sedgwick: "All along we said that the market overreaction to the announcement on sanctions was driven by fear rather than by real shortages."
"Markets get it wrong occasionally as they did a few weeks ago on one side and they're doing it again on the other today, but ultimately the pendulum will swing to a reasonable middle," he added.
Saudi Arabia's energy minister also said the wider OPEC and non-OPEC alliance would not shy away from another round of production cuts over the coming weeks — if the group decided there was a need for such action.
The next full OPEC meeting, when any policy decision will be voted on, is scheduled to take place in Vienna, Austria on December 6.
About two dozen exporting nations began capping their output in 2017 in a bid to drain a global crude glut. The group agreed in June to restore some of that output, and producers with spare capacity have been pumping more oil since then.
Energy market participants had expected Saudi Arabia and Russia to recommend further productions cuts on Sunday. Instead, Riyadh and Moscow went only so far as to suggest it was a possibility.
The comments come after a significant drop in oil prices in recent weeks, as crude futures benchmarks have tumbled approximately 20 percent or more since climbing to a peak in early October.
International benchmark Brent crude settled at $70.18 on Friday, down almost 1 percent, while U.S. West Texas Intermediate (WTI) fell for the 10th straight session to close at $59.87.
The collapse in prices constitutes a stunning reversal from last month, when crude futures had hit nearly four-year highs as traders braced for potential shortages once U.S. sanctions on Iran came back into force.
Saudi Arabia's al-Falih said it had become clear that this previous spike in oil prices was "an emotional overreaction."
"I think the decisions that came out in Washington with granting the waivers … (And) with the volumes starting to show themselves and weekly inventory data, the market flipped from overreacting from one side to overreacting on the other side."
The prospect of looming sanctions against OPEC's third-largest producer had prompted some investors to bet on Brent soaring above $100 a barrel before year-end. But, any talk of a return to tripe-digits has since evaporated.
Instead, bearish market sentiment has pressured U.S. crude into its longest stretch of daily declines since 1984.
Saudi Arabia, Russia and the U.S. — the world's top three exporters — have more than compensated for lost Iranian barrels since the start of the month.
In fact, all three countries are pumping at or near record highs, with other OPEC members and exporting nations also turning on the taps.
U.S. sanctions on Iran's oil sector snapped back into place on November 5.
It comes as part of a broader effort by President Donald Trump's administration to target Tehran's nuclear and missile programs as well as curtailing its support for proxy forces in Yemen, Syria and other parts of the Middle East.
The sanctions, which had been lifted under a landmark pact negotiated by President Barack Obama's administration and five other world powers in 2015, cover 50 Iranian banks and subsidiaries and more than 200 persons and vessels in its shipping sector.
The measures also target the country's national airline, Iran Air, and more than 65 of its aircraft.