October was a truly bloody month for Iraq. Since nationwide protests broke out on October 01 after the ouster of a widely popular counter-terrorism general, more than 260 protesters have been killed and thousands have been injured by security forces in a spate of violence that has engulfed the entire Middle Eastern nation. Last week, more than a million disgruntled Baghdadi citizens occupied the capital city’s Tahrir Square calling for a new round of elections. This is bad news for Iraq in many ways as it paves the way for further political instability, stokes risks of a civil war and brings the Islamic State, thought to be decapitated and shattered, back into the equation.
Let’s look at some of the major consequences of the Iraqi protest wave from an oil and gas investors’ point of view:
1. Iraqi OPEC Non-Compliance is Here to Stay
If one is asked to think of a country that failed to comply with its OPEC+ commitments throughout the past two years, the self-evident answer is Iraq (the other rogue element, Nigeria, was exempted from the first phase of OPEC cuts so its history of wrong-doing isn’t as long). Not once in 2018-2019 did Iraq comply with its OPEC+ production quota, generally hovering some 0.2-0.3mbpd above the stipulated norm. With a politically detached caretaker government in charge until the next elections Iraq’s oil companies and SOMO have no incentive whatsoever to deviate from the current line – overproduction…