September marks the end of the third quarter, with oil prices rising as indicated last month. WTI is $84.03/barrel and Brent is $87.27/barrel as of this writing. Saudi Arabia and Russia announced they would extend production cuts through September.
Union Bank of Switzerland analysts stated, “We see the oil market undersupplied. We retain a positive outlook and [expect] Brent to rise to $85 to $90 over the coming months.”
Oil prices are set to increase through the end of the year as supply struggles to meet demand, notes Joseph McMonigle, the Secretary General of the International Energy Forum. “So, for the second half of this year, we’re going to have serious problems with supply keeping up; as a result, prices respond to that,” he told CNBC at a meeting of the G20 in Goa, India.
McMonigle contributes the rise in oil prices to increasing demand from China (the world’s largest importer of crude oil) and India. “India and China combined will make up 2 million barrels a day of demand pick-up in the second half of this year,” he says.
Gulf of Mexico Speed Limit
As of the writing, it was announced that the Biden administration has negotiated a court deal with environmental groups that would involve developing new restraints to protect Rice’s whales, an endangered species.
The agreement includes sharp speed restrictions on ships and restraints that would be recommended for existing oil and gas operations for leaseholders, starting with oil and gas Lease Sale 262, scheduled for Sept. 27.
The American Petroleum Institute, the National Ocean Industries Association and the geophysical contractors group EnerGeo Alliance issued a joint state deploring the agreement: “This private settlement agreement between the federal government and environmental activists places unfounded restrictions on operations in the U.S. Gulf of Mexico that severely hamper America’s ability to produce energy.”
They argued the deal amounts to “a far-reaching ban on operation.”
A bothersome aspect of the deal is the greatly expanded area of protection for Rice’s whales based on one study that has not yet been corroborated by any independent study.
Another bothersome aspect of the deal is the 10-knot speed limit in the expanded Rice’s whale territory. The oil and gas industry is the only industry being singled out for the Gulf of Mexico speed limit.
Good News for Natural Gas
Good news for West Virginians and a win for natural gas pipelines. On July 27, the Supreme Court allowed Equitrans Midstream to resume the build-out of the Mountain Valley Pipeline by lifting a lower court order that blocked work on the project.
The swift action by the Supreme Court will allow construction to be completed and put into service by the winter season when the need for natural gas heating increases.
Additional good news for the natural gas sector: Bechtel Energy has gained its second sign-off in three months to start construction of a natural gas export megaproject in the state of Texas, with developer NextDecade Corp.’s final notice to proceed on the Rio Grande liquified natural gas terminal in Brownsville under a lump-sum EPC contract of $12 billion.
The Federal Energy Regulatory Commission has also given the approval to proceed with the building of the $2.4 billion, 135-mile-long Rio Bravo pipeline. It is to be built by Enbridge and deliver 4.5 billion cubic feet of gas each day to the export facility.
Ahead of construction, Bechtel said it has issues with more than 70 purchase orders, including civil, structural, mechanical, piping and instrumentation. The project would create 5,000 jobs during peak construction, says Paul Marsden, Bechtel Unit global president. Bechtel has a goal to hire at least 35 percent of its workforce from the Rio Grande Valley. “We need to actively forecast and manage labor availability and supply chain like never before,” he says.
As indicated in earlier issues of The Wholesaler magazine, the PVF industry is in desperate need of qualified, skilled workers required to populate our workforce, which is consistently exposed to the attrition of experienced workers.
Be Aware of Vietnamese Fittings
Pricing for the carbon-steel butt-welding fitting and forged-steel flange sector remains stable and should remain so in the ensuing quarter, barring any unforeseen disruption in the supply chain or raw material increases.
Again, a note of caution: It is being reported that the industry is seeing an increase in the import of carbon-steel butt-welding fittings from Vietnam. If these products were produced from Chinese rough fittings, it could be an attempt to circumvent specifications barring the use of Chinese material on domestic projects funded with taxpayer funds.
Additionally, for the Vietnamese fittings 12 inches and smaller, if formed from Chinese roughs, it would be a violation of the anti-dumping orders that are and have been in force for several years.
Despite U.S. Treasury Secretary Janet Yellen’s inefficacious visit to China, escalating aggressiveness of China in the Trans-Pacific region is increasing. Recently, two U.S. sailors have been arrested on espionage charges regarding the sale of secret information about military asset deployment and positioning.
Both are Chinese nationals with naturalized citizenship. The U.S. Border Patrol has noticed a dramatic increase in Chinese nationals attempting to migrate to the United States through our porous southern border.
In addition, the U.S. has approved a $345 million military aid package to Taiwan that could be putting the United States on a warpath. China sees this as a direct, deliberate and dangerous provocation.
A Russian and Chinese combined naval force has patrolled near the coast of Alaska. Eleven Russian and Chinese ships came close to the Aleutian Islands; however, they remained in international waters. Brent Sadler, senior research fellow at the Heritage Foundation and retired Navy captain, states, “Given the context of the war in Ukraine and tensions around Taiwan, this move is highly provocative.”
All countries in Asia should be concerned about this latest escalation and the effect on their supply chains.
The escalation of events emphasizes serious concerns for U.S. supply chain stability that impact the availability of offshore PVF products, such as fittings, flanges, pipe, valves and other raw materials that are particularly at high risk.
Those at risk should, if they have not already done so, prepare a contingency plan contemplating worst-case scenarios, including developing domestic supply chains.
PVF Roundtable News
The Oct. 10, 2023, meeting of the PVF Roundtable will have a guest speaker — Rick Perry, former Governor of Texas and U.S. Secretary of Energy — the presentation of scholarships and the networking session. This will be a dinner event, with doors opening at 4 p.m. CDT.
The venue for the October meeting is the Bayou City Event Center, located at 9401 Knight Road, Houston, 281-501-6720.
Please put this meeting on your calendar and register early, as our speaker garners a large audience.
The PVF Roundtable continues to work diligently to support the education and training of young associates for the PVF sector through the PVF Roundtable Charitable Foundation.
This year, The PVF Roundtable will exceed $2 million in total scholarships distributed by the PVF Roundtable Charitable Foundation since its inception to trade schools and universities for the development of a skilled labor force to meet the increasing demands of the PVF industry.
Distributions for the first half of 2023 will be announced at the Oct. 10 meeting.
The PVF Roundtable Golf Tournament and TroutBlast are the major fundraising events scheduled for 2023. The Weldbend Corp., Ferguson Industrial and MRC Global are key sponsors of these events.
As a member of the board, and I speak for all members, we thank you for your participation in these events.
With the uncertainties in the current turbulent PVF market, networking meetings are a unique venue for you and your associates to network with your PVF peers. These events provide the platform to share information, discuss pertinent issues, meet new contacts, develop long-lasting friendships and pursue new opportunities in the industry.