Recession warning: U.S. oil sector told to prepare
The oil services sector will contract in 2020 as producers cut spending in response to lower crude prices, ending three years of growth, according to Rystad Energy.
The market will shrink four per cent to $621 billion next year from $647 billion in 2019, the research company told Bloomberg News in a statement.
The outlook is based on a Brent oil price of $60 a barrel, close to where it’s currently trading.
That’s in “stark contrast” to Rystad’s previous view, which based on an estimate for about $70 oil in 2020 and saw services expanding two per cent, Audun Martinsen, head of oilfield services research, told Bloomberg News.
Oil prices are down this year amid a persistent supply glut and concerns about global demand, and that’s put further pressure in particular on U.S. shale producers, many of whom are cutting costs.
Rystad said the worst of the looming recession in services will be in shale, which is expected to see a six per cent decline in spending.
Other onshore activity will fall five per cent and offshore will drop one per cent, the company added. Subsea spending will rise because of an existing backlog.
Rystad sees overall spending growth resuming in 2021.