In May of this year, imports of OCTG surged and greatly exceeded the lagging demand, leaving stockpiles of OCTG and lowered spirits. However, the past 90 days have shown that inventories of “prime” U.S. OCTG have, in fact, decreased due to the cuts in shipments made by domestic mills. This reflects the watchful attention distributors are placing on inventory, something critical to keeping the ratio of supply and demand in sync.

The ideal scenario would reflect crude prices stabilizing in the mid 50s to 60s while overall OCTG inventory continues to whittle down. These large inventory cuts must happen in the coming months in order to make up for the beginning of the year surplus in supply.

Given WTI prices currently and the low confidence in a rebound this year, E&P’s have understandably stopped spending. Most have flown through majority of their budgets in the first half of 2015, leaving a strained cash flow for all. While this time is anything but enjoyable for E&P’s and OCTG, history tells us to keep your head above water and the reward will equal the effort.

Source: The OCTG Situation Report