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Iraqi oil production may be threat to Saudi Arabia

Saudi Arabia may lose its dominance over OPEC as a US-backed Iraq prepares to expand the world's second-largest reserves, analysts said.

OPEC ministers will probably start talks today on how to resume output quotas for Iraq, a founding member of OPEC in 1960.

Iraqi oil sales are governed by UN sanctions, not agreements among OPEC. The negotiations may last months, the analysts said.

Since the 1990-1991 Gulf War, Saudi Arabia has pumped more to compensate for Iraq's decline, helping the country become the world's top oil producer. The return of Iraq means the Saudis will have to cede some of their more than 10 percent market share, a move Crown Prince Abdullah may oppose, analysts said.

"The important thing for OPEC is to maintain a businesslike perspective to keep prices close to US$25 a barrel," said Brad Bourland, chief economist at the Riyadh-based Saudi American Bank.

OPEC's success in keeping prices close to its target in the last four years could collapse if members squabble, he said.

OPEC ministers are in Vienna to discuss how to prevent a glut and stop prices from falling, after they slid from US$34 in early March to US$24.43 yesterday.

Brent crude oil has averaged US$26.50 a barrel since 2000, 50 percent higher than the 1990s average, when the group fought over sales to the US market.
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