4Q19 OCTG Inventories: Survival of the Fittest

Photo Courtesy Borusan Jan-2020 OCTG Situation Report Cover

Photo Courtesy Borusan Mannesmann Pipe U.S.

Susan Murphy | The OCTG Situation Report

Susan Murphy | Publisher + Editor-in-Chief

Welcome to the new year and a new decade. While the results of our exclusive 4Q19 OCTG Inventory Yard Survey can’t steel you against unforeseen events, we trust it will provide some ‘2020 foresight’ to prepare you for any situation that arises in the tubular market this year. 

Gauging the fitness of the industry by measuring demand for OCTG throughout the entire supply chain across the lower 48 is the goal every quarter and what sets the OCTG Situation Report apart from all others. Our January 2020 Report offers a deep dive into all the metrics that matter in our most recent OCTG inventory yard survey as well as how the changes impact the OCTG market. 

So, let’s crunch some numbers: our 4Q19 inventory survey proved that folks were resolved to shed some ‘pounds’ heading into the new year. Overall “prime” US upstream OCTG inventories were reduced by a healthy sum thinning the total inventory count significantly. This is the leanest volume of US inventory stockpiles we’ve seen in a few years. 

We’re also pumped to announce that OCTG inventories in the “tri-state” (TX, OK, LA), where the bulk of activity we track takes place, were pared to a level we haven’t seen for almost a decade. This new low tips the scales in favor of a far better supply-demand balance when entering into a year where uncertainty rules the day. 

Another quarter of aggressive pricing helped cut excess inventories throughout the quarter putting inventory in a better position to endure any challenges that 2020 may bring. It also didn’t hurt that domestic shipments for 4Q19 are projected to be the lowest since early 2018. Likewise, imported shipments are expected to be at their lowest point since late 2016. 

With two back-to-back quarters of material destocking now behind us we’re observing a pronounced pattern that has emerged during the second half of the past two years. This conspicuous offloading of inventories appears to be the result of the intense squeeze put upon producers from Wall Street making for a 1H weighted market, where 2H “budget exhaustion” more or less creates the conditions for OCTG for the remainder of the year. It will be interesting to see how this development shifts oilfield dynamics moving forward.  

Despite the weighty talk of industry belt-tightening and profit growth over production growth, there’s no good reason to throw in the towel. While CAPEX is trending down Y/Y operators are able to do more with less, thus supporting continued well activity. OPEC-Plus output cuts together with falling production in North America also favors improving market dynamics; and no one would be wrong to expect them—just not this year. So, while 2020 may feel more like an exercise in routine, we should remind our readers of the old adage: “no pain, no gain!”

Photo Courtesy Borusan Mannesmann Pipe U.S.

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 2020 E & P Budgets, CAPEX, Crude Oil Prices, E&P, E&P spending, Energy, ERW Pipe, HRC, Inventory, OCTG, OCTG CAPEX, OCTG Consumption, OCTG Consumption & Pricing, OCTG domestic shipments, OCTG Exports, OCTG Imports, OCTG inventories, OCTG Inventory Survey, OCTG mill, OCTG Mills, OCTG Pricing, OCTG Processors, OCTG Producers, OCTG Spot Prices, Oil & Gas Industry, Oil & Gas Pricing, Oil Country Tublular Goods, Oil Patch, Oil Services & Equipment, Onshore, Permian Basin, Prime Pipe, Q4, Seamless Pipe, Shale, steel industry, Supply Chain, upstream OCTG and tagged , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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