August OCTG Rumors, Prices & E&P CAPEX, Oh My!
Well folks, if you’re reading this today you’ve survived another eight months in the oil patch with only four months left in 2023. The month of August tends to be rather quiet historically, but August 2023 has rocked the rumor ‘mill.’ What this means for OCTG is that we can’t move forward without addressing the elephant (herd?) in the oil patch, aka U.S. Steel. We’re pretty sure y’all have ‘herd’ the news.
Short story—the ‘Cliffshanger’ edition: the 122-year-old steel sector icon has received multiple “unsolicited” proposals for both specific assets, and the entire company. At present, USS’ CEO, David Burritt, has said they’re committed to maximizing value for stockholders and have commenced a comprehensive review of strategic alternatives. And while the United Steel Workers (USW) claim they’re only willing to give their blessing to the Cleveland Cliffs deal per their recent labor agreement, U.S. Steel says otherwise. So, what happens next? We discuss potential outcomes in our August market intel
Okay, that’s a wrap, folks. Only kidding. There are actually a few other things going on in the tubulars market that we address in this month’s Report.
Depending on your position in the oil patch, this month’s pricing either brought distress, or relief. Sellers have become more jittery as rig counts continue to fall, and that all-too-common uncertainty pervades the market yet again. So, what does this mean for prices moving into the year-end and new year?
Before we cast any predictions, we can’t help but be reminded of the quote, “forecasting is really easy, unless you have to consider what might take place in the future.” For one, there’s a great and deepening divide between the oil & gas commodity market and oil & gas production. Earlier this month the EIA reported crude stocks fell by 17 million barrels in one week, the largest drop in US crude inventories according to records dating back to 1982. As this trend is expected to continue, one would also expect to see a corresponding increase in crude prices. But what about a corresponding increase in drilling? Our August Report considers the current rig count and early Capex guidance along with domestic mill sentiment heading into Q4.
We also discussed our concerns about potential outcomes from periods like this in our June market intel, and our 2Q23 OCTG inventory survey (July) only adds fuel to that fire, so we won’t repeat them here, other than to say it may be worthy of rereading. Perhaps the “calf” (aka baby elephant) in the oil patch is the query, “when will OCTG prices normalize back to historical levels?” The correct answer is discussed in our August Report.
Since we started this month’s editorial discussing the elephant in the oil patch, it seems only fitting we close with a quote that is a good reminder for everyone facing the unpredictable, hyper-competitive environment that characterizes today’s OCTG business climate: “How do you eat an elephant? One bite at a time.”
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Photo Courtesy Port of Houston