OPEC's surprise decision to cut oil output, sending prices shooting higher on world markets, highlights the cartel's concerns about the risk of a slide in prices as Iraqi exports pick up, analysts said.
The 11-nation Organization of Petroleum Exporting Countries agreed Wednesday to cut production by 900,000 barrels per day (bpd) to 24.5 million bpd from the start of November.
"Iraq is coming into the market and there is no shortage [of oil]," United Arab Emirates Oil Minister Obaid Al-Nasseri told reporters.
"So without taking action now, this would be very dangerous in the future, especially six months ahead," he added.
The shock announcement sent prices shooting up by over US$1.00 per barrel on world markets, reversing some of the 15-percent fall since over a month ahead of the meeting.
"It's an odd move and rep-resents a bit of a setback, given that people had been expecting OPEC to at least wait until December before making any changes," said energy analyst John Cusack of US securities firm Fahnestock and Co.
"It seems they are overreacting to Iraq coming back onstream," he added.
Oil traders had assumed that OPEC would at some point reduce production to prevent a market glut as Iraq boosts its oil exports following the end of the US-led war to remove Saddam Hussein.
But sabotage, looting and security concerns have hampered efforts to revitalise the Iraqi oil industry, which has been ravaged by three wars in a quarter century, decades of under-investment and UN sanctions imposed since the 1991 Gulf War.
At the first meeting attended by Iraq since the recent US-led war, however, Iraq's interim Oil Minister Ibrahim Bahr al-Ulum laid out ambitious plans for a recovery in the country's oil exports.
Iraq, which is a member of OPEC but not part of its production quota system, would see its oil exports increase by 900,000 by next March, he said.
Current production is 1.8 million barrels bpd, two thirds of pre-war levels. The goal is to get to 2 million bpd by December, 2.8 million bpd by the end of March and 6 million bpd by the end of the decade, he said.
Though Bahr al-Ulum, appointed by the US-backed interim Iraqi authorities, reassured OPEC ministers that Iraq would remain a member of OPEC, the decision will ultimately be for an elected government in Baghdad.
Even if Iraq does stay in the fold, other OPEC members will likely have to accept lower individual output quotas to make way for the oil giant, which sits atop the world's second-biggest known crude oil reserves.
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