Saudi Arabia faces deeper Opec cuts after Iraq opts out of deal

London

SAUDI Arabia faces the prospect of much deeper - and financially painful - oil production cuts after Iraq joined the queue of group members seeking immunity from the deal hatched in Algiers.

In addition to Iraq, the second-biggest exporter in the group, Iran has already sought to exclude itself. Output is also recovering from fields in Nigeria and Libya, two more countries that were exempted from the Algiers deal because violence has wrought havoc in their oil industries. Taken together, more than a third of Opec's (Organization of the Petroleum Exporting Countries) production now stands outside the plan.

Iraq's plea to be left out prompted Olivier Jakob, a consultant at Petromatrix GmbH, to quip that the oil club stood for the "Organization of Producers Exempt from Cuts". The worsening Opec equation presents Saudi Arabia with a difficult choice after its Algiers U-turn: carry a greater burden within the group, ceding market share to other producers, or lose credibility by softening the terms of the deal. In a worst-case scenario, Saudi Arabia will have to cut production by m…