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(Bloomberg) -- The battle for customers among OPEC members that helped trigger oils collapse is about to escalate.

Iraqi crude production is climbing from a 35-year high as it adds growing Kurdish supplies to its exports, while southern oilfields remain unscathed by Islamic State militants. Finding buyers for the new output means offering more attractive terms than rivals in the Organization of Petroleum Exporting Countries, say Citigroup Inc., DNB ASA and Barclays Plc.

Oils biggest slump in six years gained momentum in October as a wave of discounts by Middle Eastern producers signaled OPEC members were intent on defending market share against booming shale output from the U.S. The price of Saudi crude for Asian buyers was cut to the lowest in at least 14 years last month, a move followed by Iraq, Kuwait and Iran.

This price war is not just between Saudi Arabia and the U.S., its also intra-OPEC, said Seth Kleinman, head of European energy research at Citigroup in London. Iraq and the U.A.E and everyone else is cutting prices to defend their own market share. Iraq is ramping up production and has rising volumes to move.

Brent crude, the international benchmark, fell 48 percent last year, the biggest drop since 2008 amid a production surplus estimated by OPEC at about 1.5 million barrels a day. The slide continued this month to the lowest since March 2009. Brent for March settlement lost 44 cents to $49.16 a barrel on the ICE Futures Europe exchange in London at 9:27 a.m. local time on Wednesday.

The discount on shipments of Iraqs Basrah Light grade to Asia -- at $3.70 a barrel to the average of regional benchmarks Oman and Dubai crude in February -- remains near the widest since at least August 2003. Saudi Arabia set the discount for its Arab Medium blend at $2.80 on Jan. 5.

Iraqi crude output has hit a record 4 million barrels a day, Oil Minister Adel Abdul Mahdi said in Baghdad on Jan. 18. Average monthly output rose 290,000 barrels a day to 3.7 million in December, the most since 1979, the International Energy Agency, a Paris-based adviser to 29 developed nations, said in a report on Jan. 16.

Exports from the Kirkuk oil field, which neighbors the Kurdish region in northeast Iraq, resumed for the first time since March following a deal in December between the central government and the semi-autonomous Kurds. Kirkuk crude, halted amid attacks by Islamist fighters, can now be shipped to Turkey using the Kurds pipeline. Exports from the south have also surged and are scheduled to reach a record 3.3 million barrels a day in February, the IEA estimates.

OPEC agreed in Vienna on Nov. 27 to maintain its production ceiling of 30 million barrels a day, resisting calls for cuts from members including Venezuela and Libya. The group pumped 30.2 million barrels a day last month, exceeding its target for the seventh consecutive month as Iraq expanded output by 150,000 barrels a day, according to data compiled by Bloomberg.

Iraq needs to keep increasing oil production because tumbling global prices have reduced government revenue by about 50 percent, Deputy Prime Minister Rowsch Nuri Shaways said at the World Economic Forum in Davos, Switzerland on Jan. 21.

Link:
Iraq Oil Surge to Fan OPEC Rivalry That Triggered Slump