At year-end, the oil industry was grappling with a mere five-month supply of oilfield tubulars. That's because operators have been consuming tubulars out of inventories during the past year, rather than purchasing new materials from manufacturers, says a recent report by Raymond James & Associates. With the rig count rising steadily, operators now must buy new tubulars to match the pace of higher drilling levels. At the same time, stocks must be replenished. "The limited inventory on the ground, coupled with increasing demand for tubulars, means that tubular shipments should even outpace rapidly increasing tubular consumption over the next several months," says the investment banking firm. Industrywide utilization levels now approach 65% to 70%, more than double the 30% level at the beginning of 1999. Not surprisingly, prices for tubular goods are expected to move briskly upward. Spot prices have already jumped $20 per ton since the May 1999 low-water mark of $708 per ton, notes Raymond James. Deliveries scheduled for early 2000 are averaging more than $800 per ton. The firm's forecast for the next six months calls for a mid-80% utilization rate and prices close to $850 per ton. Consequently, the firm expects manufacturers of tubular goods to enjoy excellent earnings during the next year. Raymond James currently has Buy recommendations on both Maverick Tube and Prudential Steel. -Peggy Williams

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