Oil prices could fall sharply if Iran and Iraq increase production to raise cash for post-war reconstruction.
A glut in world oil supplies drove the price below the $18 a barrel level set by the Organization of Petroleum Exporting Countries even before the Aug. 20 cease-fire in the Persian Gulf war. Prices now stand at around $15 a barrel.OPEC's efforts to curb output depend on whether it can persuade Iran and Iraq not to use their newly regained export capacity.
The cartel already is plagued by overproduction by some of its 13 member states, mainly Iraq and the United Arab Emirates. Current total output is estimated at around 20 million barrels a day, around 3.5 million barrels above the cartel's quota ceiling.
OPEC's secretary-general, former Indonesian Energy Minister Subroto, recently visited Tehran and Baghdad to persuade Iran to allow Iraq a quota equal to its own, 2.36 million barrels a day. That's far less than what both countries pumped before the war broke out in September 1980.
Iraq refused an earlier OPEC quota of 1.54 million barrels a day and demanded parity with Iran. Iraq failed to win that during the war, leading it to pump as much oil as it could, about 2.8 million barrels a day.
Iran and Iraq desperately need revenues to rebuild their economies. Each depends on oil for about 90 percent of its foreign earnings. Both have both made developing their oil facilities a top priority. Iran's long-term production target is 4.5 million barrels a day, around its prewar level.