After the sharply negative start to the year for Iraqi equities, the market measured by the RS ISX index rallied hard and erased all losses. We have long argued that the market is well set for a market rally and this quarter could well be the starting point. It was very positive to see foreigners being active on the buy-side. The banking sector was leading in terms of performance and liquidity with Bank of Baghdad rallying 36% on the back of reporting improving corporate results.

Looking at the key numbers for Iraq it is difficult not to get turned on. Non-oil growth is expected at over 5% in 2019, price of crude is up around 20% YTD, Iraqi government bonds are trading at multiyear high and near par and the equity market is bombed-out after five horrendous years for equity investors.

Looking at the growth of oil, one can conclude that despite the extraordinary challenges of the war against IS, Iraq has made impressive gains, nearly doubling the country’s oil production over the past decade. It might come to a surprise to our readers that since 2012 Iraq has accounted for one in every five barrels of global incremental oil supply, second only to the United States. Iraq´s largest oil field, Rumaila, is currently producing around 1.5 mb/d, which makes it the second-largest producing field in the world. BP, which operates the field, has managed to reduce the cost of production to a mere USD 3.5/bbl. Iraq produces 4.74mn bpd and at the end of the quarter, the price of Brent was $67/bbl.

Sources: Bloomberg LP, Rabee Securities