OCTG’S Q2 Curveball: A Win or Rainy Day Delay?
When it comes to OCTG inventory, it’s commonly accepted that The OCTG Situation Report is in a league of its own. Each quarter we swing into action to report the results of the prior quarter. By now, most oil patch participants know we cover all of the bases related to collecting inventory counts throughout the entire supply chain. To ensure the most accurate results, we involve a team of people who count pipe at truck terminals, mills, processors, and inspection yards across the lower 48. Right off the bat we can announce the results of our exclusive 2Q23 Inventory Yard Survey threw a curve ball, and yet one that is a win for “Team OCTG”—at least for the moment. The inventory build we were betting on simply didn’t materialize this quarter.
Last quarter was a whole different ball game, with an inventory increase the likes of which we hadn’t seen in ages. So, what drove the slide we witnessed in this past quarter’s results? Far be it from us to spitball theories on what may have occurred. Fortunately, our exhaustive post-survey investigation into the stats unearthed a number of dynamics that spurred this outcome in varying degrees, many thanks to an all-star group of experts who weighed in this quarter. We’ve boiled our conclusions down to three contemporaneous factors. 1) green tubes inventories, 2) distributors inventories 3) the historically low-level mix of casing vs tubing reported this quarter. All were explained in great detail in this month’s quarterly Report.
Despite WTI’s 2Q23 average running -$34.96 BBL Y/Y, and Nat Gas averaging -$5.32 MMBtu Y/Y, BHI U.S. and tri-state rig counts have managed to synchronize closely with those posted in 2Q22 when commodity prices were substantially higher, helping to keep OCTG consumption from falling off a cliff. Now with imported OCTG counts estimated to diminish when all is said and counted for 2Q23, quarterly months of supply is expected to hold in a safe place.
All of this is yet another reminder, in times of volatility, no one can afford to take their eyes off the ball. As we wind up our inventory coverage of the 2nd quarter of 2023, even with all we know, the outcome of this year is really anyone’s game. Baseball legend Yogi Berra may have summed it up best saying, “it ain’t over ’til it’s over.”
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