Potential Supercycle in Oil Services#

A recent analysis by Bernstein analyst Guillaume Delaby indicates that the Middle Eastern oil services sector may be entering a significant boom similar to the one experienced in the 1970s. Delaby's insights suggest that current market conditions mirror those that led to the last major surge in oil prices and services.

Historical Context#

Delaby uses the metaphor of "the wolf" to describe oil as a political tool, particularly during times of high prices. He references the 1973 Yom Kippur War, which he believes triggered a dramatic increase in crude oil prices, skyrocketing threefold between 1974 and 1975, eventually reaching $37 per barrel by 1981. This period was highly profitable for companies like SLB, which saw substantial growth in revenues and market value.

Current Market Indicators#

Bernstein points out that SLB's valuation metrics from the early 1970s are strikingly similar to those of the sector today. For instance, SLB's enterprise value (EV) to revenue ratio was 1.62 in 1971-72, closely matching the current sector average of 1.72 as of March 2026. During the previous supercycle, this ratio increased to 3.2, suggesting that current conditions may also lead to significant growth.

Factors Supporting a New Supercycle#

Delaby believes that several factors indicate a new supercycle is likely. These include improving market sentiment, especially before the recent Iran crisis, and the fact that 90% of current exploration and production (E&P) capital expenditures are only maintaining existing production levels. Additionally, there is a renewed need for exploration after years of decline and the emergence of new, cost-effective offshore drilling opportunities. Bernstein anticipates that all companies they cover will benefit from these trends, either directly or indirectly. In the short term, firms with limited exposure to the Middle East but strong positions in North America, such as Tenaris, Vallourec, Viridien, and SLB, may see the most advantage as oil service stocks begin to align more closely with oil prices.