Iraq's biggest jump in oil production since 1998  is increasing the burden on Saudi Arabia to lower crude exports  to prevent price declines next year. The kingdom curbed crude output in November to a 13-month low, according to Organisation of Petroleum Exporting Countries (Opec). Iraq plans next year to pump as much as it did when Saddam Hussein came to power three decades ago, its oil minister said on December 9. Supply will also rise in Libya and Nigeria while the United States experiences an oil shale bonanza."Saudi Arabia's dilemma is that while it is the key Opec player willing to cut back oil production in order to sustain prices at desired levels, it is also accommodating Iraq's rising output and market share," said Julius Walker, global energy markets strategist at UBS Securities. "Ultimately, there will need to be an agreement between the two as how to balance these ambitions."Saudi Arabian oil minister Ali Al Naimi needs to keep prices high enough to fund social spending plans without incurring the wrath of consumers for hurting the global economy. Iraq, now the second-biggest supplier in the Opec, has a different priority: to rebuild its industry after decades of war and sanctions.Arab states are spending billions of dollars on housing and local projects to allay popular unrest after uprisings toppled leaders in Libya, Egypt and Tunisia and sparked a civil war in Syria. Saudi has committed more than $600 billion in social and infrastructure projects in coming years.Iraq surgeIraq's production surged 650,000 barrels a day this year to 3.35 million, the biggest annual gain in 14 years, according to data, amid assistance from foreign oil companies that are paid a fixed amount per barrel produced, regardless of international price levels.  The Middle Eastern state plans to boost output to an average 3.7 million barrels a day in 2013 and at some point in the year match the 1979 record of 3.8 million, oil minister Abdul Kareem Al Luaibi told reporters in Vienna.The nation has been free of strict Opec quotas since 1998 and the resumption of any allocation is a 'sovereign issue' rather than a decision to be made by an organisation, Falah AlAmri, Iraq's governor on the Opec board, said on December 12. Brent crude traded as high as $109.58 a barrel today on the ICE Futures Europe exchange. It may sink to $88 by June if Opec fails to rein back supply, according to Leo Drollas, chief economist at the London-based Centre for Global Energy Studies, which was founded by former Saudi oil minister Sheikh Ahmad Zaki Yamani in 1990.Iran sanctionsSaudi Arabia's task will become more difficult should Iran resolve its standoff with the international community over nuclear research and resume pumping oil at normal rates. Sanctions against the Islamic republic, once Opec's second- biggest producer, have cut its exports by 50 per cent, says the International Energy Agency.While acknowledging its output will exceed customer needs in 2013, Opec refrained from cutting its group target at a meeting in Vienna two days ago, judging prices were high enough for now. Iraq, Iran and Saudi Arabia also failed to agree on the appointment of a new Opec secretary-general, opting instead to keep Abdalla El Badri in the role for a further year.Saudi Arabia reduced its output to 9.67 million barrels a day last month, according to a monthly report from Opec that cited secondary sources for its data. In its own direct communication to Opec, the kingdom said November production was even lower, at 9.49 million.Minimum levelThe country can tolerate crude oil prices falling no lower than about $90 a barrel, according to Jamie Webster, a Singapore-based consultant at PFC Energy. The CGES estimates that Saudi Arabia's budget-balancing price is $95 a barrel, more than $10 below current levels. Arab Light, Saudi Arabia's largest export grade, was at $107.22 yesterday, according to data.National Commercial Bank, the nation's largest lender by assets, said in a November 27 report that the kingdom's budgeted oil price for next year is $65.Demand for Opec's crude will shrink to 29.7 million barrels a day in 2013, the organisation's secretariat said in a statement at the end of its meeting in Vienna. That's 300,000 barrels a day less than its official target and 1.1 million a day below November's actual output, Opec data show.Need to cut"Opec is overproducing, and the Saudis need to cut,"  Roy Mason, founder of Halifax, England-based tanker tracker Oil Movements said by phone. "It will be the Saudis taking that initiative." The global economy is unlikely to be booming next year and there's more chance that oil demand will tumble than surge, possibly requiring Opec to reduce supply by as much as 1 million barrels a day, Mason said. "By late-February to March, the spring season will be emerging and it will be clearer to them what refiner demand is going to be in the second quarter." Iranian oil production, which slumped to 2.65 million barrels a day in October, the lowest level since February 1990, may climb if a new government can come to an agreement with Western nations, according to JBC Energy.The country pumped as much as 6 million barrels a day in the 1970s before the Islamic revolution, which was followed by U.S. sanctions and the 1980-1988 Iran-Iraq War. Iran's insistence on atomic research led to a toughening of sanctions this year, including an embargo by the European Union and reduced insurance cover for supertankers carrying its oil. An Iranian presidential vote is scheduled for June.Libya, rebuilding its oil industry after last year's uprising against Muammar Qaddafi, plans to raise output to 1.7 million barrels a day next year from about 1.5 million a day this month,  oil minister Abdulbari Al Arusi said in Vienna. Nigeria expects output to reach normal levels in the first quarter, oil minister Diezani Alison-Madueke said after the Vienna meeting. Output was hampered in the past months by floods, theft and pipeline leaks that forced several producers, including Exxon Mobil and Shell.