The conequences of the Covid-19 pandemic on energy demand affected oil and gas prices through much of 2020 and weighed on drilling rates and demand for oil-country tubular goods (OCTG) in most regions.
These effects were most likely to continue well into 2021 and perhaps longer, according to Fastmarkets OCTG Intelligence Service Five-Year Forecast.
The North American markets were the hardest hit in 2020, with drilling activity quickly responding to the energy price cuts. The resulting drop in demand by 3.2 million tonnes in one year came on the heels of a tough 2019, when investment cuts trimmed consumption for the year by more than 850,000 tonnes compared with 2018.
This culminated in an aggregated decline in demand by 4 million tonnes over two years.
Fastmarkets expected that the annual growth in regional consumption would be 0.67% from 2019 to 2025, which means a slow recovery in OCTG demand and prices.
The regions outside of North America – especially the CIS, Africa, South America, other Asian territories and the Middle East – also experienced a steep decline in OCTG consumption in 2020, according to available data, with major projects either canceled or delayed.
Fastmarkets forecasts that 2020 will prove to have been the bottom of the downturn, with expectations for consumption in 2021 to rise by 3 million tonnes year on year, and annual growth of 4.9% for the period 2019-25.
In the second half of 2021, delayed projects may be resumed, but the current oil price forecast of $50 per bbl for Brent crude for the year gives little indication of a significant rebound in drilling and OCTG demand.
China and Europe showed small pickups in 2020 consumption, surprisingly, due to large infrastructure stimulus from governments, compared with 2019.
Also, the Chinese government has planned more exploration of shale gas and natural gas in the next five years since the country’s energy demand was expected to rise sharply. Because of this, Fastmarkets maintains its bullish attitude toward future OCTG demand and prices, expecting 1.16% annual growth until 2025.
On the question of whether OCTG demand will exceed historical peaks, from 2022, we expect modest annual growth through the forecast period, with global OCTG consumption exceeding 17.7 million tonnes in 2025. This forecast may challenge the total from the peak year of 2014.
African consumption will lead this growth, from a very low base, followed by other areas of Asia, the CIS and China.
Europe and South America may be hit hardest by project delays and cancelations through the forecast period, although market participants still hold high expectations for energy development growth and OCTG consumption.
Some of the largest OCTG consumers in the Middle East and North America were still forecast to report gains in the latter part of the forecast, assuming that oil prices and energy demand recover.
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