Energy Markets Still a Silver Lining for the Steel Industry

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.

On December 12th Gaurav Agnihotri wrote, “On December 10th, OPEC and non-OPEC producers signed their first oil production agreement in Vienna in fifteen years. The outcome of this meeting between OPEC and non -OPEC members will definitely support oil prices in the near future. However, the deal also signifies the fact that Saudi Arabia has been defeated by the U.S shale industry in its oil price war. The Saudis started pumping the markets with oil in 2014 in order to drive the U.S shale drillers out of business. That did not happen, and the U.S shale industry turned out to be more resilient that the Saudis could have ever imagined. In fact, with its rising fiscal deficit and a generous public spending, cheap oil has affected Saudi Arabia’s economy in such a way that the country is now trying to develop its non-oil based sectors. This is the reason why the probability of Saudi Arabia dominated – OPEC sticking to its commitment to production cuts is high.”