CERAWeek’s Muted Refrain: “Que Sera, ‘CERA.’”
The once thunderous ‘Shalelujah Chorus’ that led prior CERAWeek congregations was more muted than in past years as discussion of sweet crude’s sweet spot atrophy was on full display this March in Houston. And while one might think the US ‘unconventional’ swan song would be cause for alarm, many industry executives voiced little concern concluding almost unceremoniously, “Que Sera, ‘CERA,’” (whatever will be, will be), in suggesting greater reliance on OPEC from here.
And so, we began our annual US OCTG supply forecast for 2023. In order to put this year’s forecast in context, it became clear we needed to recalibrate some of our annual OCTG forecasts formulated back in the ‘heyday’ of 2022 when we published our November market intel. Better to correct the course and carry on with confidence. This isn’t to say it’s all doom and gloom in the oil patch, it’s just not the ‘boom’ we’ve grown accustomed to over the past couple of years. Dampened commodity prices for both oil and gas have erased some of the supposed gains for the rig count in 2023 and thus we trimmed our average rig count forecast as seen in our March Report. The continuing inventory builds, and subsequent inventory hangover anticipated from the current rig count correction tempered our original consumption forecast as well. Our prediction is detailed in this month’s Report. These were the parameters we needed to reset in order to calculate the supply scenario for OCTG this year.
We commence this exercise by surveying every domestic OCTG mill, requesting their production forecast for the year. We then build a consumption model around the forecasts to determine if they’re viable based on all of the current market intel. As it turned out, it’s not so easy to flip the switch on the “growth mode” mentality that’s been part and parcel of the OCTG supply side for the past couple of years. Mills have put a lot of blood, sweat and tears into building production to this point and they’re understandably reluctant to buy into an uncertain new reality. How did we know this? One hint was the higher than expected Y/Y production increase that domestic mills put forth for 2023. Based on the volume of data we have at our disposal, we cut both the domestic and imported forecasts in an effort to present the most realistic outcome at this early juncture of the year. We also discuss our expectations for imports for 2023. If you’re a subscriber you have the data and analysis in this month’s market intel.
It certainly seems as Texas weather goes, so goes the OCTG market this month. March came in like a lion and hopefully goes out like a lamb. Perhaps there’s something to be said for the CERAWeek perspective after all as, “Que Sera, ‘CERA’” seems to be a rather fitting refrain.
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Photo Courtesy Port Houston