Oil and Gas Prices and Rotary Rig Counts through November 2016

The prices of oil and natural gas drive the consumption of oil country tubular goods (OCTG) and related steel products. The energy markets represent a large portion of the hot rolled coil used to make pipe and tube as well as equipment used to drill and pump oil and natural gas.

OPEC is in disarray. At the historic meeting in Algiers on September 28th, Algeria was appointed as chair of the Technical Committee. Its primary responsibility was to define the production-cut mechanisms in each member country as part of the implementation of the decision taken at the meeting. Further meetings took place in Vienna on October 28th and 29th at the OPEC headquarters. These meetings were nonproductive. Instead, on November 14th Iran announced that it intends to increase production in certain fields by 750,000 b/d, but it needs more investment and technology. With a little more than two weeks to go before the end of November OPEC meeting, there is no mechanism to implement a cut to 32.5 to 33.0 million barrels of oil a day. Last week, OPEC disclosed that its members produced 33.6 million barrels per day in October and it is difficult to see which countries would cut production, since Libya, Nigeria, Iraq and Iran have all refused. Saudi Arabia, Kuwait and UAE are the only candidates.