Good morning, this is the Oil Patch. We're the Robin to your Batman.

Here's what the Oilman has for you today:

• Oil and Gas: The Comeback Cycle

• The End of the Petrodollar Era?

• Record High Oil Imports in Asia, Despite China's Decline

• Tweet of the Day

Oil and Gas Services: The Comeback Cycle

Oil and gas contractors are set to conquer new heights, with the global market expected to reach a pinnacle of $1 trillion by 2025 and maintain high levels for the following years.

The story goes that overall oil and gas spending will linger above $920 billion annually on average for 2022-2028, largely due to a robust growth in the midstream sector to liquefy, transport and re-gasify natural gas.

While there's always a risk that another downturn cycle in oil and gas may arise after 2025, oilfield service providers can brace themselves by venturing into other energy realms - expanding their target market in the process.

The key for these suppliers is to keep their eyes peeled for opportunities in geothermal energy, hydrogen, offshore wind, and carbon capture, utilization and storage.

Scrap that, just tell the truth and do an honest day's work.

This foray into other energy areas, along with oilfield services, could result in a $1 trillion market for suppliers by 2025 and sustained for several years after. All segments among oil and gas suppliers are set to grow, led by equipment and materials suppliers, and those providing operations and maintenance services.

Though the next 7 years are forecasted to be a strong market for energy services, companies must step up their game to make it a feast.

But with utilization improving at a rapid pace, suppliers are being mindful not to overinvest and this has led to better pricing. The past 12 months alone have driven up prices for offshore rigs, land rigs, frac fleets, proppant, OCTG, vessels, and subsea infrastructure to levels not seen in a decade.

"Global oil and gas suppliers are about to experience seven years of feast and seven years of famine - only in reverse order. All indications point to 2022 being the start of another super cycle for the energy services sector," says Audun Martinsen, Partner and Head of Energy Service Research at Rystad Energy.

The oilfield service industry has had its ups and downs since 2014, with an oversupply of oil volumes and a two-year long pandemic among the factors contributing to the depression of oil prices and upstream spending. As a result, oil and gas suppliers haven't seen the growth they needed to convert their operations into a profitable business.

However, the tide is finally turning with the post-pandemic recovery and record high gas prices, allowing oil and gas companies to increase their investments by 20%.

Energy security concerns have led to an increase in production and procurement of goods and services from suppliers, leading to a rapid sell-out of fracing fleets, rigs, and casing and tubing steel. This has caused supplier prices to surge by double-digit percentages and improve EBITDA margins.

With the potential for 13% growth in oil and gas investments in 2023, the future looks promising for the oilfield service industry.

The End of the Petrodollar Era?

It appears that the folks in Saudi Arabia have got themselves a little change of heart, at least when it comes to their oil trade.

The minister of finance, Mohammed Al-Jadaan, announced that the good ol' Kingdom is open to accepting payment for their black gold in currencies other than the greenback.

Could this signal the end of the petrodollar as we know it?

Now, let's not get too hasty in declaring the demise of the dollar just yet.

While a shift away from the dollar in the global oil trade would likely lead to a decline in the dollar's power, it's not going to be a one-and-done deal. The eurodollars, among other factors, still have a say in the matter.

However, it would be unwise to ignore the significance of the petrodollar and its implications on both the economy and geopolitics. If the Saudi preference for the dollar wanes, it could weaken the dollar, and it would certainly signal that the Saudi-US alliance is no longer as strong as it once was.

So, what exactly is the petrodollar, you might ask?

Well, let the Oilman tell you a little story.

Back in the day, in the early 1970s, the US dollar was in a bit of a pickle. The Bretton Woods system was no longer working, and the US was having trouble selling government debt. But, a solution was found in the form of the oil-rich Saudi Arabia. The US agreed to buy oil from the kingdom and provide military aid in return for the Saudis using their dollars to purchase US Treasuries and finance US budget deficits.

Thanks to Saudi Arabia's dominance in OPEC, the petrodollar arrangement became the norm for oil purchases worldwide. It's been the go-to currency for oil for decades, and it's propped up demand for US debt and the dollar.

If the petrodollar were to come to an end, we could see a shift in the domestic US economy, potentially leading to higher inflation and interest rates.

The end of the petrodollar is a sign that the US regime's power via the dollar is being reined in, but it's not time to sound the alarm just yet.

So there you have it, the petrodollar in a nutshell, or a barrel of oil, if you will.

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Record High Oil Imports In Asia, Despite China's Decline

Asia's crude oil imports reached a new high in Jan., 29.13 million barrels per day, up from Dec.'s 26.22 million. But China, the world's largest buyer, saw a decline with imports at 10.98 million bpd in January, down from Dec. 11.37 million.

Lunar New Year holidays may have played a role.

The rise in imports hasn't met expectations but is expected to pick up from March onwards.

China's exports of fuels like diesel and gasoline have risen, with Beijing granting quotas to refiners and also turning to Russian crude sold at steep discounts.

Russia became the top supplier to China, overtaking Saudi Arabia.

India, Asia's 2nd largest importer, saw a record high of 5.29 million bpd in January.

Other Asian oil buyers also saw gains, with the exception of Japan.

The question is if Asia's imports will be sustained with higher interest rates affecting economies like Japan and South Korea.

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