Prism signal

Nocar supply

High Oil Prices Will Spark Limited Response

Analysts & contributors

Elena Every


Ian Nieboer, P.Eng., CFA

Managing Director

Bill Farren-Price



How will NOCAR rig-driven production respond to tighter balances and higher prices in the wake of the Ukraine war and the loss of some Russian oil supply?

Key Points

  • The oil price rally prompted by the loss of some Russian oil supply will boost rigs butproduce a limited increase in oil supply in NOCAR countries. At current strip prices, we expect a 22% increase in the rig count across price-responsive regions (from 270 to 330) by the end of 2023. This corresponds to growth of ~200 Mbbl/d beyond our existing NOCAR forecast of26 MMbbl/d for that period, as reported in March’s PetroLogic.

  • The most responsive regions include Australia, China, Colombia, Ecuador, India, Indonesia, Mexico and non-OPEC Africa (excluding Egypt), where a combination of rig availability and NOC-controlled operations facing less investor pressure allow a supply response. Within NOCAR, onshore rigs counts respond to price signals with about a six-month time lag while offshore rigs respond in ~12 months, we estimate.
  • Modeling a six-month lag between rig deployment and first production, Colombia is projected to show the largest outright growth by the end of 2023 (60 Mbbl/d), followed by Australia.

  • Any significant supply increases beyond our current forecast would need to come from new projects. Reduced investor confidence in long-cycle oil and concerns about peak demand, which we expect later this decade, pose considerable headwinds to new project sanctions.

  • This muted response (less than 1% of current NOCAR production) to an otherwise world- changing event highlights NOCAR’s output stability across a wide range of market conditions. The major countries in the stack responsible for keeping net volumes flat operate on a long-cycle project basis where rigs are already contracted to development drilling plans, limiting a quick response to prices.


Energy security is at the forefront of international politics as the West looks to substitute ~3 MMbbl/d of Russian supply in its balances. Enverus expects U.S. oil supply to surge this year by ~1 MMbbl/d exit-to-exit and by 800 Mbbl/d in 2023, with infrastructure limitations, labor constraints, and material and service cost inflation posing significant headwinds to additional growth. International operators could look to NOCAR (non-OPEC, Canada, U.S. or Russia) countries to boost the current output of 25.8 MMbbl/d. Given historical data suggesting an average response lag of six months for onshore rigs and 12 months for offshore rigs across the stack (Figure 1), we expect the supply response to recent high prices to be limited and lagged by 18-24 months.

Need To Know

Enverus developed a regression model for each NOCAR wedge capturing rig deployment in response to price signals between 2016 and 2019 – a period of relatively stable macro conditions and wide price spread. A rig response to price signal lag of six months was assigned for onshore rigs and 12 months for offshore. For countries displaying a price-response correlation above 50%, we ascribed incremental growth according to production additions per rig from our base case forecast by country.

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