As we embark on our 36th year in business we’re reminded that our long history is due, not to any supernatural powers we might wish to possess but entirely to the powerful ace up our sleeves called data. The vast amount of facts and figures we collect and analyze each month imbues us with a bit of oil patch telepathy that we alchemize and share with our subscribers.
This month in The OCTG Situation Report we’re zeroing in on the “disappearing act,” an analogy that best sums up the results of our exclusive 4Q21 OCTG Inventory Yard Survey where a considerable quantity of prime, finished OCTG in the L48 was shed Q/Q. And presto, just like that, inventories were held static at their lowest volume since the first half of 2008 where they’ve remained since 1Q21. Inventories of OCTG in the “tri-state” (TX, OK, LA) region were clipped a fair amount, while tubular inventories outside the tri-state region contracted to a lesser degree.
Similar to 3Q21, moderate increases in seamless mill capacity, depressed shipments from welded producers and lukewarm advances in imported goods now mixed with property taxes kept inventories in check, further contributing to the protracted market tightness. Inventory draws were reported in every product category (both SMLS & ERW) throughout the tri-state in Q4 except tubing, which expanded by a moderate amount this past quarter. Leading the destocking movement was casing, followed by carbon and welded goods. Welded stocks currently occupy the lowest percent of the mix since 3Q03.
Inventory changes don’t happen in a vacuum; they influence every area of OCTG operations, further underscoring the need for accurate inventory stats. We offer a deep dive into what took place in Q4 OCTG inventories and consider its impact on the market in this month’s Report.
Armed with our exclusive inventory data points we moved to the next step in our ‘Situational’ analysis where we revealed the results of our annual “active” versus stalled and/or obsolete OCTG inventory survey. This add-on survey is always a big help in further dissecting inventories, shedding light, and providing color on the past quarter’s drawdown. It also enables us to triangulate this intel into a new quarterly months of supply figure to compare to the prevailing quarterly months of supply data point. The outcome of that exercise was a stark reminder that market tightness is not hocus-pocus. The OCTGenie is out of the bottle for now.
We have no illusions about the coming year, but we don’t see it as a Catch ’22 either. The challenges present will be overcome in due course. The promise of an oilfield rally and stronger drilling activity is palpable. So, conjure your nerves of steel and remember fortune favors the brave.
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: https://www.octgsituationreport.com/subscribe
Photo Courtesy BENTELER International AG