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Fitch Revises Outlook on Iraq to Stable

Fitch Ratings revised the outlook on Iraq’s long-term foreign-currency Issuer Default Rating (IDR) to Stable from Negative. (AFP)
Fitch Ratings revised the outlook on Iraq’s long-term foreign-currency Issuer Default Rating (IDR) to Stable from Negative. (AFP)
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Fitch Revises Outlook on Iraq to Stable

Fitch Ratings revised the outlook on Iraq’s long-term foreign-currency Issuer Default Rating (IDR) to Stable from Negative. (AFP)
Fitch Ratings revised the outlook on Iraq’s long-term foreign-currency Issuer Default Rating (IDR) to Stable from Negative. (AFP)

Fitch Ratings has revised the outlook on Iraq's long-term foreign-currency Issuer Default Rating (IDR) to stable from negative and affirmed the IDR at “B-”.

The outlook revision reflects a smaller-than-expected decline in foreign reserves and materially higher oil prices relative to Fitch's baseline in April 2020.

Iraq’s rating is constrained by commodity dependence, weak governance, high political risk and an undeveloped banking sector.

Fitch expects government debt per GDP to decline in 2021 to 74 percent, before increasing gradually towards 80 percent over the medium term.

Political risks, domestic and regional, constrain the rating, it explained, expecting reserves to stabilize in 2021 as stronger oil prices and the devaluation narrow the current account deficit (CAD).

In other news, spokesman for Iraq’s Ministry of Electricity Ahmed al-Abadi said the US General Electric Co will take over Iraq's transmission network and interconnection with the electricity grid of Jordan.

In press statements on Wednesday, Abadi said the electric interconnection projects with neighboring countries are vital and contribute to supplying Iraq with power.

The project will take 26 months to be implemented and will supply Iraq with 150 megawatts of electric power.

Details of the project's launch phase will be set after approving the country’s 2021 state budget law.

In 2019, Iraq signed a deal with the GCC to build a power line that would import 500 megawatts of electricity.

According to Abadi, the project was activated but was later suspended due to the coronavirus pandemic and the global economic crisis.

He pointed out that the government agreed to open headquarters for the GCC Interconnection Authority (GCCIA) to later proceed with the project’s implementation.

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Oil Slumps More than 4% after Iran Downplays Israeli Strikes

Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo
Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo
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Oil Slumps More than 4% after Iran Downplays Israeli Strikes

Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo
Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo

Oil prices tumbled more than $3 a barrel on Monday after Israel's retaliatory strike on Iran over the weekend bypassed Tehran's oil and nuclear facilities and did not disrupt energy supplies, easing geopolitical tensions in the Middle East.
Both Brent and US West Texas Intermediate crude futures hit their lowest levels since Oct. 1 at the open. By 0750 GMT, Brent was at $72.92 a barrel, down $3.13, or 4.1%, while WTI slipped $3.15, or 4.4%, to $68.63 a barrel, Reuters said.
The benchmarks gained 4% last week in volatile trade as markets priced in uncertainty around the extent of Israel's response to the Iranian missile attack on Oct. 1 and the US election next month.
Scores of Israeli jets completed three waves of strikes before dawn on Saturday against missile factories and other sites near Tehran and in western Iran, in the latest exchange in the escalating conflict between the Middle Eastern rivals.
The geopolitical risk premium that had built in oil prices in anticipation of Israel's retaliatory attack came off, analysts said.
"The more limited nature of the strikes, including avoiding oil infrastructure, have raised hopes for a de-escalatory pathway, which has seen the risk premium come off a few dollars a barrel," Saul Kavonic, a Sydney-based energy analyst at MST Marquee, said.
"The market will be watching closely for confirmation Iran won't counter attack in the coming weeks, which could see the risk premium rise again."
Commonwealth Bank of Australia analyst Vivek Dhar expects market attention to turn to ceasefire talks between Israel and Iran-backed militant group Hamas that resumed over the weekend.
"Despite Israel’s choice of a low aggression response to Iran, we have doubts that Israel and Iran’s proxies (i.e. Hamas and Hezbollah) are on track for an enduring ceasefire," he said in a note.
Citi lowered its Brent price target in the next three months to $70 a barrel from $74, factoring in a lower risk premium in the near term, its analysts led by Max Layton said in a note.
Analyst Tim Evans at US-based Evans Energy said in a note: "We think this leaves the market at least somewhat undervalued, with some risk OPEC+ producers may push back the planned increase in output targets beyond December."
In October, the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, kept their oil output policy unchanged including a plan to start raising output from December. The group will meet on Dec. 1 ahead of a full meeting of OPEC+.