August marks the midpoint of 2024’s third quarter, with oil prices trading at $3 lower per barrel in June and July. As of this writing, WTI is $82.80/barrel, and Brent is $86.29/barrel.

Oil prices edged higher after industry data showed a larger drawdown in U.S. crude stockpiles, indicating a solid fuel demand during the summer season.

U.S. gasoline demand is expected to rise as the summer travel season begins with the Independence Day holiday. The American Automobile Association forecasted that holiday travel would be up 5.2 percent over the same period as 2023.

On the supply side, OPEC oil output rose in June as higher supply from Nigeria and Iran offset the impact of the voluntary supply cuts by other members of the wider OPEC+ alliance.

Hurricane Beryl made landfall near Matagorda, Texas, as a Category 1 hurricane. The effects on production in the Gulf of Mexico, inland oil fields and refinery output on pricing have not been determined as of this writing. 

Marathon Petroleum’s 665,000 barrels/day (b/d) Galveston Bay refinery briefly lost power on July 8, and one other refinery cut output. In addition, the loss of power also led to the Explorer Pipeline closing parts of its systems.

At the beginning of July, U.S. crude oil refinery inputs averaged 16.79 million b/d, an increase of 260,000 b/d from June. Refineries operated at 93.5 percent of capacity, up 1.3 percent from June.

Both gasoline and distillates showed drawdowns despite higher refinery runs as demand increased for both commodities.

Manufacturing Contraction Continues

Economic activity in the manufacturing sector has continued to contract for the 19th time in the last 20 months, per the nation’s supply executives in the latest Manufacturing ISM Report On Business.

Timothy R. Fiore, CPSM, CPM, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee, reports: “U.S. manufacturing activity continued in contraction at the close of the second quarter. Demand was weak again, output declined and inputs stayed accommodative.

“Demand slowing was reflected by the (1) New Orders Index improving to marginal contraction, (2) New Export Orders Index returning to contraction, (3) Backlog of Orders Index dropping into stronger contraction territory, and (4) Customer’s Inventories Index moving into the low side of the ‘just right’ range, neutral for future production.

“Demand remains subdued as companies demonstrate an unwillingness to invest capital and inventory due to current monetary policy, inflation and other conditions. Suppliers continue to have capacity, with lead times improving and shortages not as severe. Sixty-two percent of manufacturing gross domestic product contracted in June, up from 55 percent in May.”

U.S. manufacturing contraction explains the anemic demand for diesel fuel, which has not rebounded in line with exceptions at the start of 2024. Output has essentially remained unchanged compared to a year ago, and no significant net growth since 2018.

More than three-quarters of all diesel and other distillate fuels are consumed by road and rail freight haulers and industry users. Distillates supplied from petroleum sources fell by 213,000 b/d (5 percent) as more fuel was supplied by biodiesel and renewal diesel fuel.

The U.S. Energy Information Administration is not forecasting any significant net growth in distillate consumption for the remainder of 2024 and 2025.

Data Center Construction

Data centers and chip manufacturing dominate the industrial construction market. Meta announced on July 2 that it is in the process of constructing an $800 million data center located on the south side of Cheyenne, Wyo. The center will optimize artificial intelligence performance for Meta’s online products, including Facebook, Instagram and Messenger, among others.

Meta plans to work with Black Hills Energy to add new resources to the energy grid, including renewables. Three Microsoft data centers are already in the area; one is across the highway from Meta’s. They require huge quantities of reliable (24/7) energy.

Fortis Construction, an Oregon-based company, will temporarily employ 1,000 skilled tradespeople. Wyoming stood out as an excellent location for Meta’s newest data center due to its access to infrastructure, energy, a deep pool of talent and great community partners.

On June 28, 2024, the U.S. Supreme Court struck down the Chevron doctrine as it was inconsistent not only with the Administration Procedure Act, but also with the Constitution’s division of power among the three branches of government.

The major ruling by SCOTUS sharply cuts back the power of federal agencies to interpret the laws they administer and ruled that courts should rely on their interpretation of ambiguous laws. This decision will have far-reaching affects across the country on environmental regulations.

The impact of this decision on the energy sector of the economy may bode well for the petrochemical, gas, oil and pipeline industries. This may clear the way for the development of new pipeline infrastructure that is much needed to alleviate bottlenecks impeding the transportation of products from production to market. 

Shipping Backups Return

Ship backups that plagued seaports during the COVID-19 pandemic are making a comeback as vessel diversion due to attacks in the Red Sea trigger gridlock and soaring costs at the start of the peak shipping season.

The average worldwide cost of shipping a 40-foot container hit $4,119 mid-June, per Freightos, more than triple the cost in June 2023 and the highest since September 2022.

The pricing and the availability of commodity carbon steel butt-welding fittings and forged steel flanges remain stable. However, with tensions continuing to rise in both the Pacific and the Mideast, along with the shipping constraints at the Panama Canal and the continuing attacks on commercial shipping by the Houthis in the Red Sea, supply chains remain vulnerable to disruptions and higher costs.

It is wise to remain in close contact with your manufacturer/supplier to avoid surprises regarding the U.S. Tri-Seal Compliance Note, pricing and the availability of pipe, forged flanges, butt-welding fittings, valves and other PVF-related products.

PVF Roundtable News

The PVF Roundtable Golf Tournament scheduled for May was canceled due to extreme flooding. The tournament has been rescheduled for Dec. 9. Please check the PVF Roundtable website (www.pvf.org) for updates and details.

The PVF Roundtable TroutBlast is scheduled for Oct. 3-4, with the Captain’s Dinner on the third, followed by the tournament on the fourth. Please check the website for additional information due to the impact of Hurricane Beryl on Matagorda, Texas.

The PVF Roundtable Golf Tournament and TroutBlast are the major fundraising events scheduled for 2024. The Weldbend Corp., Ferguson Industrial and MRC Global are key sponsors of these events.

The next Networking Meeting of the PVF Roundtable will be August 13, beginning at 4 p.m., followed by a sit-down dinner with guest speaker Jeff Bagwell. A retired Houston Astro first baseman, Bagwell was part of the “Killer B’s,” along with Craig Biggio, Sean Berry and Derek Bell. Bagwell and Biggio were inducted into the National Baseball Hall of Fame in 2017 and 2015, respectively. 

The event will be held at the Bayou City Event Center in Houston, 9401 Knight Rd., 281-501-6720.    

As a member of the board of directors, and I speak for all members, we thank you for participating in these events.

With the geopolitical uncertainties in the world today and their potential effects on the PVF marketplace, Networking Meetings are now, more than ever, essential for you and your associates. These events provide the platform to share information, discuss pertinent issues, meet new contacts, develop new long-lasting friendships and pursue new opportunities in the industry.