The date circled in red on big oil’s calendar is 30 November, when OPEC delegates will meet in Vienna to ratify the preliminary agreement reached in September to freeze output increases. The process is going forward in spite of persisting unwillingness on the part of Iran, which is still set on regaining the market shares it lost before sanctions against it were lifted. Iraq is also unwilling to commit to the freeze, anxious to step up revenues in order to fight ISIL. Speaking to reporters at the Asia-Pacific Economic Cooperation summit in Lima, Russian president Vladimir Putin stated that he believes there is a "strong likelihood" that a deal will be reached. The market welcomed the optimistic outlook with a rise in share prices, now at 47.49 USD per barrel for futures in WTI (Dec ’16). Wall Street also responded, with the share price of major oil production and exploration firms going up 4% relative to the same time last year.
Meanwhile, Saudi Arabia is proceeding at a brisk pace toward diversifying its economy, although Saudi Aramco will continue to have an essential role to play. Riyadh is aiming to transform the extraction giant into a modern integrated company like the American Exxon, capable of expanding its business to cover petroleum-derived products. As Aramco CEO Amin Nasser pointed out at a recent press briefing, the entire Middle East produces just 2.5% of global revenue from petrochemical products and has less than 1% of the sector’s workforce. The first step in this transformation is the opening of the massive Sadara refinery in the Saudi city of Jubail, on the Persian Gulf. The facility is a 20 billion dollar investment developed in cooperation with Dow Chemical in order to process the ethane extracted by Aramco to create various compounds for export across the globe.
On the other side of the world, the Obama administration has sent a reminder to the oil industry that it is still in charge, laying down a new extraction plan for the state of Alaska that halts the sale of offshore exploration leases in the Chukchi and Beaufort seas. The decision is also a consequence of Shell ceasing operations there after disappointing results from exploratory drilling operations that cost nearly 7 billion USD. This presents yet another headache for president-elect Trump, who will have to find a way to follow through on his campaign promises to step up drilling on federal land, especially in deep red states like Alaska.