Posted on 22 Apr 2020
The historic oil dip witnessed this week will likely have few near-term consequences for steel tubulars, market players tell Kallanish.
Long-term, however, the industry is likely to undergo a series of sweeping and structural changes.
“Yesterday’s bust was because May contracts were expiring and storage capacity was full or committed,” says one Gulf Coast trader. “There was no place to put the oil. Too much demand kill from [... Covid-19] worldwide.”
While steel tubulars are far enough down the supply chain to be insulated from any immediate change, the writing appears to be on the wall for tubular demand for the foreseeable future, he says.
“Long term, the rig count will fall, crushing pipe demand,” he says. “Completion activity will halt, which is bad for pipe. And demand for more takeaway line pipe will decline as well with fewer completions.”
A second Gulf Coast trader points out the oilpatch has been suffering since at least November 2018, and the coming changes are likely to be seismic.
“I feel very confident that the other side of this will change our lives forever and a new way of life and doing business will be upon us,” he says. “Until we all get back to burning gasoline, producing more electricity, and factories consuming both, this oil price dilemma will remain in unknown territory for an unknown period of time. The same holds true with steel and tubulars. We have way more capacity to produce both than the world can consume.”
Source:Kallanish
