OCTGPS for 2022: ‘Fuel’ for Thought
Welcome to our annual OCTGPS for 2022: your exclusive road map to navigating the year in OCTG. It will come as no surprise to oil patch stakeholders that there’s a lot riding on 2022 as the market shifts into high gear. Buckle up!
Our forecasts kick off with the oil and gas price rally that is driving the energy sector, bringing with it long overdue optimism and a fresh injection of Capex. This in turn is giving rise to the rig count. Our rig count forecast for 2022 can be found in the November OCTG Situation Report. Meanwhile, DUC inventories are declining, another catalyst for rig adds as producers endeavor to maintain current production levels. If only that was all there was to it. But we’re talking about the oil patch here and there’s always a pesky speed bump that attempts to stall the momentum.
Perhaps of all the spoilers, none is more unpredictable or urgent than finding and retaining qualified employees needed to ramp up operations and meet demand across the supply chain. The widespread worker shortage, a pandemic hangover, and a host of logistical disruptions will likely be a drag on what could otherwise be a seamless year. While we don’t presume apparent consumption will return to pre-pandemic volumes in 2022, subscribers to our monthly market intel will receive our outlook for the new year. The $64,000 question is, can supply rise to the challenge? We examine this in detail therein.
Last month we reported a pivotal trade case looming on imported OCTG from Argentina (AD), Mexico (AD), Russia (AD & CVD) and South Korea (CVD). If “injury” to the US tubular industry is determined by the ITC later this week, meeting our consumption forecast will depend on domestic producers of welded OCTG firing on all cylinders—pronto. Based on the duty rates set for the petitioned countries—in addition to any preceding applicable duties, tariffs, or quotas—we would also need to see countries outside of the trade case fill in potential holes that may arise in imported OCTG and related materials. Without all hands on deck, the supply/demand equation will be mismatched.
Provided there are no black swans on the horizon, we believe the forces of supply and demand can align and come into balance in the back half of 2022. Looking further ahead, into 2023, is where we see the potential for today’s shortage to become tomorrow’s surplus.
This brings us to the all-important issue of OCTG pricing and our prognosis for the spot market into and through 2022. We offer a comprehensive analysis and timeline for this in the November Report.
We close out our annual OCTG forecasts knowing it won’t be long before the rubber meets the road. While we can’t promise a smooth ride to the finish line, we do know there are enough tailwinds to suggest the tubulars market is on the right track.
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 Port Houston