Lubricating the oil cycle
The oil price is on the rise again. Having fallen below $50 per barrel of Brent crude, it's currently trading close to $67.
So while drivers and oil-burning businesses find prices rising a bit (but well below levels seen last summer, when it was $115), is that the crisis over for the oil industry?
No, but it does suggest that the most recent episode of volatility found a floor.
The price is well capable of taking another downward lurch. But as the supply of oil declines from fracked reserves in North America - those being short-term wells which produce for a matter of months before needing re-fracked - then supply and demand are meeting at a higher price than in January.
That shouldn't be a surprise. The first quarter was expected to be the time of maximum supply, before it reduced. That's so long as the Saudis did nothing to throttle back on their production. On the contrary, they increased it a bit.
It has helped stabilise the oil price for China to boost its imports of the black stuff - up in March by 6.5% on the previous year. According to Platts, the oil data company, that's the highest rate of growth since last September.
So at a higher and more settled price, what happens now? Back to normal?
The evidence is of some harsh cost-cutting, and that is unlikely to stop - particularly in UK waters, where costs looked like they were getting out of control.
Sentiment about the industry's future continues to fall, according to the UK industry's most recent survey.
But the cost cutting is having the desired effect. Wood Mackenzie, the Edinburgh-based energy consultancy, reckons that, worldwide, the point at which producers break even on a barrel of oil has fallen by $20 to $72.
That means the industry is still losing cash at current prices, but if costs continue to fall, it should stop those losses.
Much of that is as a result of cutting capital expenditure, down by 24% across the industry this year, or $126bn, says WoodMac. Dividends are also being cut, as are share buy-back programmes.
For offshore production, there's only so much cost-cutting you can do. For onshore fracking, it's much easier. Some companies have cut costs by $80, slashing their break-even points as well.
But a modest bounce-back in prices doesn't mean the capex taps will be switched on again quickly. Douglas-Westwood, another energy consultancy, has market analysis pointing to a tail of investment commitments, which gradually falls away in some sectors, unless the price picks up.
In the installation of sub-sea hardware, for instance - an area where Aberdeen has specialism and a big export presence - the market looks good for the next three years, on the back of existing commitments.
Douglas-Westwood forecasts global subsea hardware Capex will total $145bn between 2015 and 2019 - a growth of more than 27% compared with the preceding five-year period.
It says the 350 subsea tree installations (the structure of valves that controls and monitors flow) in 2014 represent the highest volume of installed units on record. That growth is expected to continue until 2018 when the lower oil price will lead to fewer orders.
One area of big growth is the shift from fixed offshore platforms to floating production. It's estimated that could grow by 76% from the first half of the decade to the second.
This year, spend on floating production is estimated - again worldwide - to be $12bn, rising to $21bn in 2017 and then falling back to $17bn in 2019. Most of that is from investment decisions already taken.
In MMO, or maintenance, modifications and operations, last year saw $95bn spent worldwide, on more than 8,000 offshore platforms.
This is expected to increase by more than 5% per year over the rest of this decade, mainly because these platforms are ageing.
Up to 2019, MMO on fixed platforms is expected to see $426.1bn spending globally, with a further $55.6bn of MMO on floating platforms. But this year is seeing a sharp decline, down by 12%, as operators slash costs on the non-essential elements.
A lot of this ought to be good news for Aberdeen, which has developed a big reputation for its offshore expertise. With the decline in the North Sea seen decades ago, it set out to build exports, and that is bearing fruit.
But Douglas-Westwood sees a further problem for the industry from the dramatic changes seen in recent months, and that is in recruitment.
The UK industry was facing a demographic problem anyway, and last year, the industry and government agreed they had to work hard to recruit people into the industry, underlining how international the prospects are.
However, downturns shake out thousands of workers. The consultancy says it is nearing 100,000 job losses around the world already.
That makes it much harder to find space to recruit the next generation of young people into the industry.
And looking at senior management grades now, it is reckoned that the talent pool is suffering from the shake-out of staffing and low levels of recruitment during the last oil price slump in the late 80s and early 90s.
In a highly volatile industry, such cycles can have very long effects.
$1 = 66p and £1 = $1.51