Global oil rig numbers are set to rise above pre-financial crisis levels for the first time next year, according to a report released today.
Rising oil prices and lower cost bases mean the oil sector is “ripe for a bounce”, BMI Research said.
However, while regions such as the Middle East and Latin America are to prosper, the outlook for the European oil sector is less rosy, as companies compete for capital under revenue constraints.
BMI, part of the credit rating agency Fitch, forecast Brent Crude to average $57 per barrel in 2018, up from $53.50 it expects the average to be for 2017.
“The signs of recovery have already begun to tell, with all markets covered in the Baker Hughes international oil rig count posting a rig count equal to or higher than the post-oil crash low,” the report found.
The report said that the Middle East would continue to dominate oil production for the next five years, with producers from the region accounting for 42 per cent of global output.
A low-cost resource base has seen oil prices remain comfortably above commercial breakevens, allowing producers to recycle capital into new projects.
But Europe and sub-Saharan Africa will lag, BMI found.
“In a revenue-constrained environment, most projects will struggle to compete for capital. A maturing and high-cost resource base, coupled with other prohibitive fiscal terms will continue to depress margins, warding off potential investment.”