OPEC�Secretary-General Mohammed Barkindo said the 14-nation group is facing its toughest challenge as members debate oil-production cuts needed to balance the market.

�OPEC has gone through good times and conditions for more than half a century and hard ones too, and the current stage is the hardest one,� Barkindo said during a visit to Baghdad in remarks distributed by Iraq�s Oil Ministry. OPEC is working hard on a solution to stabilize the market, he said after meeting Oil Minister Jabbar Al-Luaibi for talks.

Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, threw an obstacle in OPEC�s path toward a production-cuts deal this weekend when it balked at joining efforts to trim output.�The country should be exempted from curtailing supply because it�s embroiled in a war with Islamic militants, Al-Luaibi said Sunday in Baghdad.

OPEC needs to allocate production quotas to individual countries after�reaching a surprise agreement last month to reduce output for the first time in eight years. Iraq has become the fourth member -- after Iran, Nigeria and Libya -- to seek an exemption. The organization is also trying to woo non-OPEC producers such as Russia to join in the cuts.

Al-Luaibi said Tuesday that Iraq is �optimistic� that�all producers can reach an agreement.�An OPEC committee will meet later this week to try to resolve differences over how much individual members should pump. The group aims to make a final decision on quotas when it meets in Vienna on Nov. 30.

By Bloomberg