Offshore Shipbrokers Ltd (OSL) in the UK says that, looking ahead to longer term prospects for the North Sea market, it would seem that newbuilding orders are drying up somewhat compared with the previous ordering frenzy.
"This is possibly as an acknowledgement that the worldwide orderbook is perhaps already larger than the market will be able to absorb, but more likely due to increasingly worsening global economic conditions," said the broker in its latest monthly report.
"The news isn't so good for operators either, with the oil price now below US$85 per barrel on demand fears, and as the global economy continues to slow and demand continues to dwindle some analysts are predicting a return to the US$40-$50 levels," said OSL.
However, as OSL also noted, OPEC has threatened to cut production if the price drops below US$80 per barrel, in an attempt to shore up the price. "However, with the global indices in meltdown and many economies heading into recession it may not be enough."
"There can be no doubt that if the oil price continues to fall on lagging demand and financial conditions continue to worsen that operators will begin to reduce their exploration efforts. Even so, it will likely be a couple of years away yet before this happens, and with market for drilling rigs still very busy for 2009 and 2010 it seems the biggest threat to the buoyant market remains the worry of overtonnaging," OSL concluded.