Following three consecutive years of growth, the oilfield services market is set to slip into recession in 2020 if oil prices stay at their current low levels, Rystad Energy said on Wednesday.
According to Rystad Energy, total global revenue of oilfield services firms will decline by 4 percent in 2020 if oil prices stay flat next year.
This year, the oilfield services market is expected to grow by 2 percent to US$647 billion, the energy consulting and business intelligence firm has estimated. But if oil prices stay at around US$60 a barrel Brent Crude, the revenues would likely drop to some US$621 billion next year, putting an end to three years of revenue growth in a row, Rystad Energy warns.
"Lower oil prices call for negative growth in the service market in 2020," Audun Martinsen, head of oilfield services research at Rystad Energy, said in an update on the sector.
"For suppliers, this means that a three-year growth story will come to an end regardless of which market segment you look at," Martinsen added.
The biggest drag on oilfield service revenues would be the U.S. shale industry as it is expected to contract by 6 percent next year. Offshore oilfield services purchases are seen down by 1 percent as companies would cut back on exploration activity to cut costs at these oil prices, Rystad Energy said.
"This new market view stands in stark contrasts to what we previously forecasted when oil price estimates stood around $70 for 2020. At that oil price, the service market was expected to grow by 2%, held up by offshore and shale. However, downside risks have been mounting in the oil market, and we could face additional headwinds in 2020," Martinsen said.
As of 2021, the oilfield services market is expected to recover from what is now expected a downbeat year 2020, Rystad Energy said.
In recent months, the U.S. shale patch has started bracing for an extended period of weak oil prices, and drillers and oilfield services firms have been cutting staff and reducing budgets to weather the slowdown in North America's fracking growth.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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