Opec is set to sidestep the problem of a potential flood of Iranian oil exports and rising Iraqi production as it prepares to announce its production quotas.

The 12-member organisation is widely expected to announce the continuation of a 30-million-barrel-a-day (b/d) quota at the end of its meeting in Vienna on 5 June.

However, the oil producers’ group does not have a strategy in place to accommodate major increases in Iranian production should sanctions be lifted against Tehran’s oil and banking sectors on the back of a nuclear agreement.

Iran’s Petroleum Minister Bijan Zangeneh told the Vienna conference that the country could boost production by 500,000 b/d within a month of sanctions being lifted and 1 million b/d within six months. Tehran is also storing anything up to 35 million barrels of crude that it plans to dump on the market the second sanctions are lifted.

Meanwhile, Iraq’s Oil Minister Adel Abdul Mahdi said Baghdad is set to increase its exports by 100,000 b/d in June after hitting long-term record production in recent months.

With Saudi Arabia, the body’s largest exporter, also increasing exports, the Opec does not appear to have a strategy to keep a lid on potential production increases in the coming year.

In Opec’s latest report it estimated, based on direct communication with member countries, that an average of 31.5 million b/d was produced in March and in 2014 pumped an average of 30.7 million b/d.

When Saudi Arabia decided in November to maintain production levels despite plummeting crude prices, many analysts questioned whether Opec still had any relevance.

Opec’s role as an oil producers’ group is largely to cut production at times of weaker demand to maintain high prices. If the organisation, and particularly its swing producer Saudi Arabia, no longer have the will to take action, then it appears to have abdicated this role.

But Opec’s failure to control its individual members’ production to meet the quota constitutes a second crisis for the cartel.

If a sanctions-free Iran bounces back with an additional 1 million b/d it does not appear that Opec – with its core members Saudi Arabia and the Gulf states pumping flat-out – will be able to hold its members’ production back to meet the quota.

With the Brent crude price stabilising at about $65 a barrel – about $20 higher than the bottom of the market in January – Opec leaders maintain that their strategy of maintaining high production is working.

“If Opec members want to keep prices at the same level, we expect them to make room for Iranian oil,” Zanganeh was quoted as saying by Shana news agency.

A key test of Opec’s relevance will be whether it is able to accommodate Iranian oil by cutting production elsewhere. If a surge in Iranian crude is added on top of existing the glut, then Opec will have ceased to function.

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