NICOSIA -- Higher production from Iran and Iraq led to a "noticeable increase" in OPEC oil output in July, which is becoming a real problem, the Middle East Economic Survey reports in its Monday edition.

"The July production figures demonstrate a continuation of the progressive growth of OPEC production during the past few months accompanied by a consequent further deterioration in quota discipline," the industry newsletter says.

"This has now developed into a problem of significant proportions -- something which the OPEC oil ministers will have to address during their 19 September ministerial conference in Osaka.

"OPEC history shows that over-production is a serious issue, not just because it places unintended additional volumes in the market but because it complicates the negotiations of future production agreements," the Cyprus-based weekly says.

Production of 23.52 million barrels per day (BPD) exceeded the 21.701 million BPD quota by around 1.8 million BPD.

Output had gone up in the gulf to fuel summer demand while output fell in Nigeria and Venezuela.

However Iranian production was the higest recorded so far this year at 3.56 million BPD and Iraq pumped 1.83 million BPD.

Oil prices held steady in London on Friday, with traders reluctant to sell with the market under the threat of a U.S.-led invasion of Iraq and uncertainty over an OPEC decision on output next month.

Benchmark brent North Sea crude for September delivery rose 18 cents to 25.29 dollars a barrel in late trading.

OPEC Secretary General Alvaro Silva Calderon on Thursday appeared to play down chances of an output hike when the cartel meets in Japan.

OPEC slashed output last year to haul prices out of a steep post-September 11 slump and ministers of its member countries have been reluctant to start pumping more oil for fear of sending prices sliding again.