Environment and Energy
September 28, 2017
Rig Count on the Increase, Good News for OCTG
Written by Peter Wright
The oil and gas drill rig count is increasing rapidly as the price of West Texas Intermediate hovers near $60 per barrel. The spot price of WTI broke through the $60 level on Dec. 29 for the first time since Dec. 18, 2014. It reached $64.22 on Jan. 12 before falling back to $59.41 on Feb. 12. The total number of operating rigs exploring for oil and gas increased by 29 in the week ending Feb. 9, the largest weekly increase since Jan. 20, 2017. The prices of oil and natural gas drive the consumption of energy-related steel products including oil country tubular goods, pipe fittings and well head equipment, among others. About 5.5 million tons of hot rolled sheet was used to make welded tubular goods in 2017 (not including OCTG).
On Feb. 12, the Energy Information Administration (EIA) published a sensitivity analysis for energy exports under different price and technology assumptions and concluded as follows: “EIA projects that the United States will become a net energy exporter in 2022 in the newly released Annual Energy Outlook 2018 Reference case, primarily driven by changes in petroleum and natural gas markets. The transition from net energy importer to net energy exporter occurs even earlier in some sensitivity cases that modify assumptions about oil prices or resource extraction. Sensitivity cases with less energy production project that the United States will remain a net energy importer through 2050. The transition of the United States to a net energy exporter is fastest in the High Oil Price case, where higher crude oil prices lead to more oil and natural gas production and transition the United States into a net exporter by 2020. In that case, higher crude oil prices also result in higher petroleum product prices and lower consumption of petroleum products, driving decreases in net petroleum imports. In the High Oil and Gas Resource and Technology case, with more favorable assumptions for geology and technological developments, the United States becomes a net exporter in 2020, and net exports increase through the end of the projection period. In cases with relatively low oil prices or less favorable assumptions for geology and technological developments, U.S. net energy trade still decreases, but the United States remains a net energy importer through 2050.”
