The battered offshore oil rig market is forecast to start picking up from 2017, and a firm rebound can only be expected from 2020, according to Rystad Energy.

John Fredrik Muller, senior project manager at Rystad Energy, told delegates at the Singapore Offshore Finance Forum on Thursday that a lot more offshore rigs would need to be scrapped in order to balance the oversupplied market amid low oil prices.

“We believe oil prices are not sustainable at current levels,” Muller said. “We have already seen a steep decline in demand for offshore rigs and demand is only expected to pick up from mid-2017.”

Global offshore rig jobs have dropped by around 40% in 2015 compared to the previous year, with the North American market hit hardest. The Middle East region, however, has managed to see a slight 2% year-on-year increase in activities, data from Rystad Energy showed.

Offshore rig utilisation rates had touched close to 90% in 2014 when oil prices were still high, but the rates crashed to around 60% today. The utilisation rate will remain low and is only anticipated to rise to 66% in 2018 before gradually increasing further to 77% by 2020, according to data from Rystad Energy, an independent oil and gas consulting services and business intelligence data firm.

“From 2017 the market will become tighter and tighter, and thus recovery is expected from 2017,” Muller said.

Rystad Energy’s data is projecting oil prices to firm up to $67 per barrel by July 2017, $80 by July 2018, and a ‘best case’ scenario of $105 by July 2020.

And assuming all the forecast numbers turn out to be true, the overall offshore market will rebound to a new high by 2021 with average annual growth rate at 8%, and the segments that would pick up first in 2017 are the engineering and seismic markets, the consultancy firm believed.

“The construction and subsea markets will still be lagging behind somewhat (by 2017),” Muller said, adding that they will see increased activities only from 2018 or beyond.