Will OCTG Prove Its ‘Metal’ in 2016?

Murphy Oil Corporation August 2016 Cover

Photo Courtesy Murphy Oil Corporation

Susan Murphy | Publisher of The OCTG Situation Report

Susan Murphy | Publisher

It’s medal mania all over again as we bask in the afterglow of the 2016 Rio Olympic Games. And it’s “metal” mania here in the OCTG Situation Room as we dig into the various drivers that impact oil country tubular goods. The buzz of recent seems centered on the hot rolled coil (HRC) trade case outcome. While we share details of the results in our August market intel we offer highlights that relate specifically to OCTG here.

We reported there was a pickup in inquiries in early June and there are some E&Ps who have recently revised their E&P budgets modestly upward for the balance of the year (mainly Permian basin drillers). If there isn’t another surprise dive in crude prices, any recovery in drilling activity should help support OCTG pricing and cover the very real increased costs of coil (up ~64% after bottoming in late 2015) with which domestic welded OCTG producers have been wrestling. At the moment U.S. HRC spot prices are trending slightly lower (~$600/st) and there is insufficient OCTG demand to push coil pricing upward in the immediate term. Likewise, there’s been no jump in HRC pricing from the recent trade case determinations.

Notwithstanding the meager OCTG price increase this month, overall we see OCTG prices continuing rather choppy and increasing only marginally through the year end barring any unforeseen hiccups. But before we get ahead of ourselves, we need to look at escalating OCTG imports that threaten any chance of a sustained recovery and ask is the OCTGenie out of the bottle? License data for July is pointing to an increase of ~30% M/M for July OCTG imports bringing import volumes in the range of 96K tons for the month. Simply put, until commodity prices stabilize surplus supply from any source is unwarranted. If shipments remain elevated in the coming months without a corresponding steady uptick in demand expect to see tubular inventories reverse course and prices struggle to maintain current levels.

No matter how you slice it, we still have a ways to go to overcome the many hurdles raised by the OILigarchy (OPEC’s) run for marketshare. Right now no country is winning the oil price war leaving us to channel our inner Olympians who would remind us, “the harder the battle, the sweeter the victory.” 

About The OCTG Situation Report®

Susan Murphy is the Publisher + Editor in Chief of The OCTG Situation Report®, a leading authority focused on the North American Oil Country Tubular Goods market. Susan has worked alongside the founder of The OCTG Situation Report®, Duane Murphy (and yes, there is a family connection!) for the past decade assisting in various aspects of producing the monthly publication and special projects including market research and development. It had long been suspected that Susan carried the 'OCTGene,' a fact that was confirmed when she took the reins in 2012. A native of Michigan and now practicing cowgirl, Susan employs her education from both the University of Michigan and Michigan State University bringing her expertise in the areas of research, marketing, branding and creative and technical writing to The Report. She has also enjoyed a successful business career as a lauded entrepreneur, running her own brand/marketing and advertising/design firms.
This entry was posted in 2016 E&P Budgets, Crude Oil Prices, Department of Commerce, E&P, E&P spending, Energy, Hot Rolled Coil, HRC, OCTG, OCTG Imports, OCTG Mills, OCTG Pricing, OCTG Spot Prices, Permian Basin, U.S. HRC Spot Price and tagged , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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