US energy pipe market “still on life support”

Wednesday, 29 July 2020 21:07:43 (GMT+3)   |   San Diego

Little, if anything has changed within the US domestic energy pipe markets since our last report two weeks ago, sources note, adding that the aftershocks of the initial COVID-19 lockdown continue to permeate the market.

For example, yesterday it was reported that the recovery in jet fuel demand is expected to last “for at least 2 more years,” because passenger traffic numbers are still historically low. (A Bank of America commodities report indicates that a full recovery is unlikely until 2023, noting that the only way out of this, for jet fuel, would be a vaccine or cure for the coronavirus.)

And while Brent crude futures were trading at $43.60 earlier today, with West Texas Intermediate trading at $41.30, concerns about a possible August supply glut are rampant. Also of note, is the fact that the US, the world’s biggest oil consumer, is still being hammered by the coronavirus, which has many questioning the effect this will have on oil demand as we move into the fall.

Earlier this month, the US Energy Information Administration (EIA) projected that US motor gasoline consumption would hover at 8.3 million barrels per day (b/d), down from 9.3 million b/d in 2019.  “The annual declines are largely the result of travel disruptions and COVID-19 mitigation efforts that occurred predominantly in the first half of 2020,” the EIA stated in a press release.

The marked disruption in oil demand is further evidenced by last week’s rotary rig count report. On Friday, Baker Hughes reported that for week ending July 24, the total domestic rig count fell by 2 rigs, to 251, which reflects a 73.5% drop from levels seen during the same reporting period last year.

Energy pipe sources say that although customers continue to ask for quotes, they’re mostly small-volume inquires “that are likely due to pipe replacement projects.”

In terms of pricing, stock domestic J55 ERW OCTG casing is being head in the range of $43.00-$45.00 cwt. ($948-$992/mt or $860-$900/nt), ex-mill, whereas Korean material is still being offered at approximately $44.00-$45.00 cwt. ($970-$992/mt or $880-$900/nt), DDP loaded truck in US Gulf ports.

Spot market prices for stock API-X52 line pipe continue to be heard at approximately $41.50-$42.50 cwt. ($915-$937/mt or $830-$850/nt), ex-mill.  Prices for Mexican material continues to trend in the range of $44.00-$45.00 cwt. ($970-$992/mt or $880-$900/nt), FOB Texas.


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