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Global oil demand will recover to pre-pandemic levels late next year, the International Energy Agency predicted, urging OPEC and its allies to keep markets balanced by tapping their plentiful spare production capacity.
World consumption will once again reach 100 million barrels a day in the second half of 2022 as developed economies bring the virus under control, the agency said, in its first detailed outlook for the year ahead. At some point before the end of the year, demand will surpass pre-Covid levels, it said.
The forecast counters speculation that oil use -- and the resulting planet-warming emissions -- may have already peaked as a result of social changes in the wake of the pandemic. The IEA itself sees consumption reaching a plateau in the 2030s but hasn’t predicted a peak in demand.
Oil prices have rebounded to a two-year high above $70 a barrel as motorists take to the roads and economic activity picks up with the easing of lockdowns. The report -- which paints a slightly more bullish picture than the agency’s last outlook -- underscores that the market’s next move is in the hands of Russia and Saudi Arabia.
The Paris-based IEA made a direct plea to the OPEC+ alliance, which is led by those two countries, to continue restoring the output it cut when demand collapsed last year.
“OPEC+ needs to open the taps to keep the world oil markets adequately supplied,” said the agency, which advises most major economies. Satisfying demand growth is “unlikely to be a problem” if the 23-nation coalition acts because only a fifth of its spare capacity is needed to keep the market in balance, it said.
IEA Executive Director Fatih Birol has warned of a further price surge if extra supplies aren’t forthcoming. However, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman has said he’ll wait until consumption is tangible before responding.
Goal Achieved
The Organization of Petroleum Exporting Countries and its partners have already achieved their primary market goal, having cleared the enormous inventory glut that amassed during the pandemic, the report showed. In April, stockpiles in developed nations fell below their average for the period 2015 to 2019, OPEC’s main metric, the report showed.
The group’s next step ought to be straightforward, according to the IEA.
OPEC+ will need to add about 1.4 million barrels a day -- or less if fellow member Iran clinches a deal to remove U.S. sanctions -- leaving it with another 5.5 million a day off-line, according to IEA estimates. Bloomberg calculations suggest the buffer isn’t quite as generous.
Tehran could add 1.4 million barrels of exports if it concludes a nuclear agreement with Washington that removes U.S. barriers on its oil trade, the IEA estimates -- equivalent to the amount the entire OPEC+ coalition needs to add. The group will meet on July 1 to consider its next move.
The alliance has, perhaps unintentionally, made its job easier. By making massive production cuts last year and supporting prices, the group has encouraged investment by U.S. shale drillers and other rivals, the report showed.
Non-OPEC+ supply will rebound by 1.6 million barrels a day in 2022, satisfying half of the anticipated 3.1-million-barrel jump in demand. Demand for OPEC’s crude will be slightly lower by the end of next year than the fourth quarter of this year, at just under 29 million barrels a day.
Even if OPEC+ did ramp up output enough to meet the increase in demand, its production in 2022 would remain a substantial 2 million barrels a day below 2019 levels.
On a full-year basis, world oil consumption will remain slightly below 2019 levels next year, at 99.5 million barrels a day. The recovery in consumption will also be uneven.
While demand for gasoline and diesel fuels will jump next year, it will still be about 1% short of pre-Covid levels due to the growth of remote working and popularity of electric vehicles, the IEA said. Purchases of jet fuel will also surge yet remain 11% below prior levels because of limits on air travel.
And with countries outside the developed world still battered by new waves of the virus, the recovery may also prove patchy on a regional basis.
“While the end of the pandemic is in sight in advanced economies, slow vaccine distribution could still jeopardize the recovery in non-OECD countries,” the IEA said.
Source: Bloomberg
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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