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  • Writer's pictureSusan Murphy

Helter ‘Shelter’ in the Oil Patch with OCTG

Updated: Aug 6, 2020

Photo Courtesy Southwestern Energy Company

It’s May in the oil patch and we hope you’re doing well and staying well in this helter ‘shelter’ world in which we now find ourselves. “Helter-skelter,” as the phrase is known, seems to be an appropriate way to label the current state of upheaval in the oil & gas markets. Sadly, this is not a drill. It’s our reality these days so let’s discuss how we might navigate it.

This month in The OCTG Situation Report we focused on OCTG pricing. Our blog offers a slice of our editorial.

Perhaps not surprising given the fluid and dramatic chain of events we’re witnessing, an interesting development in the OCTG market is emerging: a divergence in pricing based on the specific supply channel. “Supply” can be sourced from mills (new production) or can be drawn from inventory and it is here where we see a disconnect. Many domestic mills are electing to cut capacity before cutting replacement costs, forfeiting market share to an uncustomary ‘competitor’ in the form of inventory on the ground. Mounting inventories exert downward pressure on prices which result in greater discounts on surplus stocks; a ‘buy-product’ of distributors and traders liquidating inventories for cash.

Meanwhile, the rumor mill’s been working overtime debating a possible spike in OCTG prices later this year. The rationale is driven by reduced levels of production in steel scrap combined with the retrenchment in domestic supply mentioned above plus a precipitous drop in imported materials anticipated for 2H20. To start with, predicting an upside in pricing is precarious at best until we arrive at a bottom in the rig count and at the moment even that’s wildly unpredictable. Will it trough at 250 or could it be less? Will it happen in June or might it be July?

You’ve probably heard of the philosophical question, “if a tree falls in the forest and there’s nobody around to hear it, does it make a sound?” The same could be said of OCTG: “if a mill raises the price and there’s no one around to buy, does it really matter?” Ultimately the pricing conundrum can only be answered by the current and foreseeable future unknown: demand and what it looks like when it begins to return. Will it be robust or tepid? And where will the available CapEx be directed? The likely answers to these critical questions were discussed in detail this month and can be found in our May Report.

Looking ahead in a year fraught with challenges doesn’t offer much in the way of excitement but let’s remember that many downturns have produced great innovations in oil and gas technologies. And perhaps, even more important, let’s not forget “tough times never last, but tough people do.”

NOTE: Our monthly blog posts offer a slice of the content we publish in The OCTG Situation Report® every month. To subscribe and/or request a complimentary copy of our Report for review please visit:

Photo Courtesy Southwestern Energy Company



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