- Sentiment on oil prices remains fragile with worries over lower demand and higher supply taking centre stage. However, rig day rates and utilisation rates remain robust even in the face of contract cancellations in Saudi Arabia in 2Q24 as several of the jack-ups have found replacement work.
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Industry dynamics remain robust despite weaker oil prices.
- Market concerns over a potential global recession has driven oil prices lower with the Brent oil price declining 16% over the past six months and down 9% year-to-date. Nevertheless, rig day rates and utilisation rates have gone from strength to strength, even in the face of negative events, e.g. Saudi Aramco’s cancellation of multiple jack-up contracts in 2Q24.
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- In addition, OPEC, the IEA and a number of industry forecasts point to a potential oil supply glut from non-OPEC countries which could require OPEC to further cut oil production. Ameliorating these factors is US shale’s relatively high breakeven oil price of US$60/bbl or more. Thus, production could be shuttered should prices decline into the US$60-65 range in our view, though Brent oil for delivery in 2030 is currently at around US$69/bbl.
M&A heating up in Singapore.
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