Analysts say the lifting of UN sanctions on Iraq, unleashing vast oil resources on the market, will force OPEC to find a new strategy to keep its grip on power, writes Amelie Herenstein.
In a watershed vote yesterday by the UN Security Council, all the commercial and financial sanctions imposed on Iraq since 1990, excluding an arms embargo, were removed.
Thus postwar Iraq, a member of the 11-nation Organization of Petroleum Exporting Countries (OPEC) and holder of the world's second-biggest oil reserves, after Saudi Arabia, is theoretically free to export oil.
For OPEC that poses a double-barreled dilemma: how to adjust in the short term the cartel's output and in the longer view, how to manage a market in which Iraq could inject rising quantities of crude.
Authorities already have indicated there are eight to nine million barrels of Iraqi oil stocked in Ceyhan, the Turkish terminal on the Mediterranean.
Mr Thamir Ghadhbane, Iraq's most senior oil ministry official, was quoted today by the Financial Timessaying that current level of production was 600,000 barrels per day.
Mr Ghadhbane, who is the executive director of the ministry, said it would take two weeks to tender for bids and arrange for oil tankers to dock in Iraq.
Once these technical questions are resolved, it is expected that Iraq would need several more months to become capable of exceeding its pre-war output level of roughly 2.5 million barrels per day (bpd).
And it is far from clear that the US wants Iraq to reintegrate into the OPEC output quota system through which the cartel manages oil prices.
The UN vote effectively hands over temporary control of Iraq's oil revenues to the United States and its allies through an internationally audited Development Fund.
Certain countries, like Iran, are plainly worried.
"It seems the United States is going to raise Iraqi production from 2.5 to 6.5 million bpd so that Saudi Arabia no longer leads world oil policy," said Iranian Oil Minister Mr Bijan Namdar Zanganeh, who fears "a modification in the power links between countries and thus in regional balance".
The United States is regularly suspected of wanting to break up OPEC, some of whose members Washington accuses of secretly financing international terrorism.
Mr Moncef Kaabi, research director at CDC, appeared less alarmist.
"The United States has an interest in seeing OPEC not break up, because the market truly has a need to be regulated. I think that OPEC will withstand [the Iraq situation], even if it goes through a very bad time," he said.
The next OPEC meeting is scheduled on June 11th in Doha, and is expected to take place in the absence of an Iraqi representative.
An OPEC source at the cartel's headquarters in Vienna said that "the lifting of the sanctions will not change the agenda because it was very much expected".
The source continued: "They might discuss that informally, because everybody is expecting Iraq to come back to the market towards the end of July ... they have to put that under consideration, they have to calculate how much Iraq will be exporting and that would affect the final decision that will be taken by the organization."
OPEC may decide on a new output cut to account for Iraq's heavyweight return to the market, bearing 112 billion barrels of reserves.
In April, the cartel simultaneously lowered output and raised quotas, which the market interpreted as a preparation for Iraq's return to the quota system.
For CDC's Kaabi, OPEC has to decide to lower quotas again from the current total 25.4 million bpd.
"They're always producing above quota," he noted, even if pre-meeting speculation is keeping oil prices high, above OPEC's preferred level of 25 dollars per barrel.
"Everybody seems to agree that there might be a need to cut, but by how much, nobody knows and they might decide not to do anything," the OPEC source said.
"Or they might decide to have another meeting in late July."
AFP