International oil prices surged after Opec producers meeting in Vienna announced an unexpected cut in oil output.
Iraq is struggling to reach pre-war output levels
The cartel of major oil producing countries decided to lower production by 900,000 barrels a day from 1 November in order to pre-empt a possible fall in prices.
"We believe that we have about 2.5 million barrels a day of
oversupply in the first quarter of 2004 and it's better to start
before to prevent a bad situation," said Iranian Oil Minister
He said more cuts could come when ministers meet again on 4
December in Vienna to set policy for the first quarter 2004.
United Arab Emirates Oil Minister Obaid Al-Nasseri sought to play down worries that the cut would prompt energy price rises.
He had indicated he was not in favour of the move but said he could "not stand alone" with his opinion.
The news shocked traders who had not been expecting any change, driving the price of the benchmark Brent crude oil up $1.13 to $26.65 a barrel.
Opec - made up of 11 countries which together pump a third of the world's oil supply - aims to keep the price of oil at about $25 a barrel by limiting the amount of oil made available to buyers.
Ahead of the news of an output cut, a row had broken out over the role of Iraq in the cartel.
Ministers had previously differed over whether Iraq's interim oil minister, appointed under the US-led administration of Iraq, should take a seat at the negotiating table.
But the cartel's president confirmed that Iraq would be granted full membership status at the meeting.
"Iraq will remain in Opec as a full member," Iraq's oil minister Ibrahim Bahr al-Uloum told a news conference.
But he said Baghdad's reintegration into Opec's quota system
would have to wait until Iraqi production, still to reach
pre-war volumes, had been restored.
Iraq is a founder member of Opec, but it has not attended a meeting since the US-led invasion this spring, and it has not taken part in Opec's output agreements since the 1991 Gulf War.
But Opec is anxious to retain Iraq, which has the world's second largest oil reserves, within its fold.