The latest forecast of global oil country tubular goods (OCTG) consumption paints a stark picture of the slowdown in demand from the energy industry in the wake of the Covid-19 outbreak and subsequent oil and gas retreat. For 2020, total global consumption is expected to amount to 13.2 million tonnes, a decline of nearly 3.5 million tonnes from 2019 consumption.
OCTG prices will remain weak in 2020 with little scope for a recovery. Electric-resistance welded (ERW) OCTG prices are expected to remain in line with seamless J/K55 pricing.
The North American markets will be hardest hit in 2020 as drilling activity quickly responded to the energy price cuts in the wake of the global pandemic. This comes on the heels of a tough 2019 where investment cuts trimmed consumption for the year by more than 850,000 tonnes from 2018. The region will now face a 2-million-tonne year-on-year hit in 2020.
The regions outside of North America – especially the Commonwealth of Independent States, China, Africa and the Middle East – will also experience a steep decline in OCTG consumption in 2020 as major projects are canceled or delayed. While we do not expect further drops in demand in 2021 from this year, we have little expectation of a recovery during the year. In the second half of 2021, delayed projects may resume activities, but the current oil price forecast of $50 per barrel for Brent crude for the year provides little indication of a significant rebound in drilling and OCTG demand.
From 2022, we expect modest annual growth through the forecast period with global OCTG consumption reaching more than 18.4 million tonnes in 2025, therefore not reaching our previous forecast level. African consumption will lead the growth, although from a very low base. Southeast Asia and South America may be hit hardest by project delays and cancellations through the forecast period, although market participants still hold high expectations for energy development growth and OCTG consumption. Some of the largest OCTG consumers – the Middle East and North America – are still expected to post positive gains in the latter part of the forecast period, assuming oil prices and energy demand recover.
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