The year began for the region with the successful implementation of an agreed oil production cut, which has stabilised prices above $50 a barrel. Opec and some non-Opec producers have agreed to take out nearly 1.8 million barrels a day from the market.

This was followed by the official inauguration of the US’ 45th president on 20 January. Donald Trump is unpredictable and untested, and leaders across the region are eagerly awaiting some clarity on his strategy for the Middle East.

Elsewhere in the region, relations between Egypt and Saudi Arabia face more uncertainty following a court ruling annulling a decision to hand over two Red Sea islands to the kingdom.

Trump vows to end US dependence on Opec

US President Donald Trump has declared he will free up the American oil and gas industry to increase output, reduce climate action laws, and end dependence on Opec and “any nations hostile to our interests”.

“The Trump administration is committed to energy policies that maximise the use of American resources, freeing us from dependence on foreign oil,” said a statement on 20 January. Trump, who has said he will maintain good relations with GCC countries, has publicly opposed the Iran nuclear deal and vowed to eliminate the Islamic State of Iraq and Syria.

Opec and non-Opec production cuts going well

An extension of the agreed Opec and non-Opec production cuts beyond the six-month time frame is unlikely, Saudi oil minister Khalid al-Falih told the World Future Energy Summit in Abu Dhabi on 16 January.

Kuwait’s oil minister had earlier said a compliance of 60 per cent had been achieved as Gulf producers Saudi Arabia, Kuwait, Qatar and non-Opec producer Oman had already cut output since the start of 2017. Russia, which had accepted a major share of the non-Opec 558,000 barrels a day (b/d) production decrease, cut a third of its required 300,000-b/d reduction for January.

A good level of compliance would ensure the rebalancing of markets by the end of the first half of the year, Al-Falih added, pre-empting a potential need for extending the production cut.

Opec’s second-largest producer Iraq, while reiterating its pledge to comply, voiced unhappiness about not being exempted from the output cuts.

Cairo set for another cabinet reshuffle ‘very soon’

Egypt’s President Abdul Fattah al-Sisi has said he is planning a cabinet reshuffle. “Yes, there will be a reshuffle and very soon…. We will fix what needs fixing and improve performance,” Al-Sisi said, without giving more details.

It remains unclear whether Prime Minister Sherif Ismail will retain his position.

The last cabinet reshuffle took place in March 2016, when Al-Sisi named 10 new ministers. That  announcement included changes to the Ministry of Finance and the Ministry of Investment.

Despite the planned reshuffle, the existing cabinet has been hailed for its bravery in applying key economic reforms after Cairo secured a $12bn loan from the Washington-based IMF in late 2016.

IMF lowers growth forecast for Saudi Arabia

The IMF says it expects GDP growth in Saudi Arabia to be 0.4 per cent in 2017, rising to 2.3 per cent in 2018. The IMF’s previous forecast in October 2016 was for 2 per cent growth in 2017 and 2.6 per cent growth in 2018.

The forecasts are for real GDP, which does not take into account gains in revenue from rising oil prices. Instead, revenues decline because oil prices are constant and Saudi Arabia has committed to cutting production by 486,000 barrels a day (b/d) as part of an Opec agreement to cut output by 1.2 million b/d.

In its 2017 budget announcement in December, Saudi Arabia’s Finance Ministry forecast GDP growth of 2 per cent for the year. The ministry added that if reforms did not continue, growth would only reach 1.2 per cent.

Abu Dhabi creates new entity for $130bn merger

Abu Dhabi has moved closer to completing the merger of Mubadala Development Company and International Petroleum Investment Company with the establishment of Mubadala Investment Company, which will own the assets of both firms. The combined assets are said to be worth about $130bn.

The new entity is a public joint stock company that will enjoy financial and administrative independence and full legal capacity to achieve its goals.

Egypt-Saudi relations tested by court ruling on island transfer

Riyadh has been Egypt’s biggest financier since the overthrow of Mohamed Mursi’s government in 2013. But a combination of falling government revenues and a number of diplomatic rifts between the two countries has seen Riyadh’s financial support slow of late.

The latest hiccup in relations came when Egypt’s Supreme Administrative Court issued a final ruling declaring Egyptian sovereignty over the disputed Tiran and Sanafir islands in the Red Sea. It followed an earlier ruling by an appeals court that upheld Cairo’s decision to give control of the uninhabited islands to Saudi Arabia. The latest ruling annuls the government and appeal court’s decision.

Syria snubs Saudi Arabia and Qatar ahead of peace talks

Syria’s deputy foreign minister has rejected the participation of Saudi Arabia and Qatar in peace talks due to be held in Kazakhstan’s capital Astana on 23 January. Faisal Meqdad was quoted on Lebanese television saying: “Once Qatar and Saudi Arabia halt their support for terrorism we will discuss the matter of their participation in the talks.”

Saudi Arabia’s Minister of Foreign Affairs Adel al-Jubeir told the World Economic Forum in Davos on 17 January that the Syrian High Commission is “not involved in the Astana talks because the talks are for the fighting forces on the ground, not the political parties involved.”

Beirut to target energy investors in 2017

The Lebanese government has passed two decrees allowing the start of a tendering process for the country’s oil and gas blocks.

Progress with the tenders had stalled since 2013 due to disagreements between Lebanon’s political parties, but the new government, led by Prime Minister Saad Harari, has passed fresh measures to map out the conditions for auctioning energy assets.

Beirut estimates the country has 96 trillion cubic feet of gas reserves and 865 million barrels of oil located offshore.

The government prequalified 46 companies in 2013 to take part in the tendering process for the oil and gas blocks.