The American Supply Association’s monthly ASA Advisor report shows February industrial production growth for primary metals of 1.7% compared to 3.5% in the last update. The Advisor notes this is part of a deceleration trend that started in December and continued through the first two months of this year. However, the Advisor cautions this still is a growing sector year-over-year, “just at a slower rate against tougher annual comparisons.”

The Advisor’s outlook sees slowing global demand, especially in Asia and parts of Europe. That slowing is starting to impact demand for primary metals, it reports. The Advisor opines suppliers will start to get more aggressive in finding new markets and customers and might be using more aggressive price discounting to attempt to drive volume; margin pressures will continue to rise into this cycle.

Also, the Advisor reports fabricated metal industrial production took a downturn in February. Industrial production for fabricated products was up 3.5% year-over-year, but down from last month’s 5.6%. The Advisor’s outlook here notes that a job-shop survey from fabricators and manufacturers shows that more than 60% of respondents expect growth to continue this year and plan to add capacity. Higher costs for commodities and logistics, the Advisor reports, are the main concern, however some of this data could also have been impacted by difficult weather conditions and the government shutdown hangover.

Oil outlook
The Advisor reports both WIT and Brent crude were higher in early March with WTI at $54.95 per barrel and Brent North Sea Crude at $63.96 a barrel. These two figures are higher than the $51.38 and $59.41 respective per-barrel prices in the last update. The Advisor notes the spread between Brent North Sea Crude and WTI was increasing and that should continue to help boost potential for U.S. crude oil exports and increases in production.

The Advisor’s outlook here is global demand is softer heading into the front half of 2019. The expected boost from a China-U.S. trade deal and a solution to Brexit are creating uncertainty and the slowdown in the EU and Asia could continue to impact near-term demand—offsetting this is a strong economic environment in the U.S. with higher consumption rates.

Rig counts
In the most recent report, year-over-year oil-rig counts are up to 1,026 (down 1) or up 36 from the previous year. Canadian rigs saw net declines year-over-year of 58. The Advisor reports there was very little change in the number of natural-gas rig counts in the last readings (+4 year-over-year).

The Advisor’s outlook here shows a strong U.S. dollar and sufficient global supply is slowing demand of new rigs. New U.S. rigs, the Advisor notes, are far more efficient, lowering the cost per barrel for production. This will help U.S. oil not only fit domestic demand, but it also will create opportunities to increase exports of raw crude oil. The Advisor adds volatility in Venezuela could still push more U.S. crude exports in the near term and bump up U.S. crude oil production.