Iraq's OPEC revolt shows Saudi-Iran oil deal fragility

Thu Sep 29, 2016 8:20am EDT
 
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By Rania El Gamal and Alex Lawler

ALGIERS (Reuters) - For years, debates in the OPEC conference room were dominated by clashes between top producer Saudi Arabia and arch-rival Iran.

But as the two managed to find a rare compromise on Wednesday - with Riyadh softening its stance towards Tehran - a third OPEC superpower emerged.

Iraq overtook Iran as the group's second-largest producer several years ago but kept its OPEC agenda fairly low-profile. On Wednesday, Baghdad finally made its presence felt.

What it did, however, pleased neither Saudi Arabia nor Iran.

Iraq's new oil minister Jabar Ali al-Luaibi told his Saudi and Iranian counterparts, Khalid al-Falih and Bijan Zanganeh, in a closed-door gathering in Algiers that "it was an OPEC meeting for all ministers", a source briefed on the talks said.

Luaibi also said he didn't like the idea of re-establishing OPEC's output ceiling at 32.5 million barrels per day (bpd), according to sources in the Organization of the Petroleum Exporting Countries.

Reviving a ceiling, abandoned a year ago because of a Saudi-Iranian clash, was seen by some members as crucial in helping OPEC manage a vastly oversupplied market and prop up prices that stand well below the budget needs of most producers.

But Luaibi told the meeting the new ceiling was no good for Baghdad as OPEC had underestimated Iraq's production, which has soared in recent years.   Continued...

 
A man walks past an OPEC logo ahead of an informal meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers, Algeria September 28, 2016. REUTERS/Ramzi Boudina