Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

OPEC Accommodates Iraq on Oil Quotas

VIENNA -- A new OPEC quota pact to accommodate revived Iraqi exports with a minimum of fuss met initial approval from oil markets, but the cartel will face bruising negotiations when it next meets in November.

A 100th conference of OPEC, the Organization of the Petroleum Exporting Countries, just held in Vienna sidestepped the thorny issues of a flawed quota system, simply freezing volume limits for 10 other members to help Iraq's return.

With a sigh of relief that a fractious cartel had reached an accord at all without a furious public row, the market ticked prices higher a few cents, to just above $18 a barrel.

But the Saudi-backed plan dismissed claims by smaller sellers keen to raise output quotas to match levels of oil production that have already lifted OPEC far in excess of its new 25.03 million barrel per day, or bpd, ceiling.

Cash-pinched populous Third World producers like Venezuela, Nigeria and Algeria -- flouting quotas and pumping to capacity -- are hardly likely to consider returning to allocations they deem unfair and inadequate.

OPEC heavyweight Saudi Arabia seems resigned to the fact that only it and Gulf neighbors Kuwait and the United Arab Emirates now are operating any supply restraint.

Having stifled the rumblings among its smaller output colleagues for a radical revision of quotas, Saudi Arabia spared oil markets the unnerving spectacle of a full-scale quotas wrangle at a time when the first Iraqi oil exports for six years loom.

Iraq's imminent return to world markets was handled adroitly by OPEC, as it refrained from assigning a formal quota and left Baghdad to produce under limits set by the United Nations.

OPEC will hope that rising world demand for oil and the need to replenish depleted crude stocks after a cold U.S. winter will mop up in the incremental Iraqi barrels.

But the extra crude, expected at some 800,000 bpd, will hit markets at a time of slack demand in the late summer, taking overall OPEC volumes in sight of 27 million bpd.

"OPEC appears to have reached a new production floor of 26 million [without Iraq]," said Mehdi Varzi, a veteran OPEC watcher.

That may send world oil stocks rising by a sharp three million bpd in the third quarter of the year, according to International Energy Agency estimates.

Even if oil prices do go into a slide before the November conference, the camp within OPEC that is led by Algeria may still press hard to shift quota distribution in its favor.