US oil and gas drilling and rig companies have boosted their demand outlooks because of the global crude oil supply shock from the US-Iran war.
US drilling contractors and oil country tubular goods (OCTG) producers now anticipate higher oil prices and increased oil and gas drilling to raise US demand in the second half of 2026, a far cry from declining rig counts and lower oil prices at the start of the year.
Pipe and tube companies are bullish as crude oil prices bolstered by the war in the Middle East raise US drilling activity. The Argus West Texas Intermediate (WTI) fob Houston assessment stood at $84.82/bl on 11 August, up from $68.19/bl at the end of February and before the onset of the war.
Rig contractors raise estimates
Publicly traded drilling rig contractors have seen the greatest shift, as they now expect a second quarterly rig count increase.
Drilling rig contractor Helmerich & Payne (H&P)'s shifting outlook reflects the war-fueled reversal of fortune in the industry. At the end of 2025, H&P lowered its rig count estimates for the first quarter because of lower oil prices and drilling activity.
"Going into [2026], things felt relatively bearish, but I do think it's quite a different story right now," H&P chief financial office Todd Scruggs said. "We think this [third quarter] is a pretty good marker for where we're going to be in [2027], we actually think we will be improving from this base."
But the stronger outlook remains contingent on oil prices staying elevated and the conflict not widening into a disruption that undercuts economic growth or drilling budgets.
At the end of the first quarter, H&P and fellow drilling rig contractors Nabors and Patterson-UTI guided for the second quarter an average of 294-301 active US drilling rigs between them. The rig operators surpassed that outlook and exited the second quarter with an estimated 316 active drilling rigs in the US, which the companies expect to grow to an approximate 324 active rigs by the end of the third quarter.
US private and independent oil and gas exploration and production (E&P) companies drove higher drilling rig demand as they capitalized on higher crude oil prices, gains that are expected to continue in the back half of the year.
The US weekly active drilling rig count has held at 588 since mid July, the highest level since April 2025 and up from 539 a year earlier, according to oilfield services company Baker Hughes.
Pipe producers expect US volumes to grow
As more US drilling rigs activate, OCTG producers are working to take advantage of greater demand, import constraints and tight inventories.
Higher US drilling activity and lower import volumes raised Vallourec's second quarter US tubular mill production and OCTG prices, chief executive Philippe Guillemot said on a 30 July earnings call. He added that US OCTG inventory levels are below five-year averages.
Tenaris chief executive Gabriel Podskuba said the company's Bay City, Texas, seamless OCTG mill is running at record production levels to meet demand.
OCTG prices have responded to the shortage and higher demand. The Argus Pipe Logix OCTG all items index, which reflects distributor selling prices, has climbed by $45/short ton (st) in July to $2,233/st, which is $224/st higher since the start of the year.
Domestic OCTG mills have pushed about $600/st of price increases into the market and have struggled to bridge a large import supply gap despite raising production.
US domestic OCTG pipe mill shipments collected by Argus and import volumes less exports from January-June are at 2.24mn st, down by about 500,000st from the same period in the prior year.
OCTG supply declined solely on lower import volumes as major foreign OCTG suppliers like Austria and Taiwan are under US antidumping investigations, causing many US buyers to refrain from importing from those countries.
The majority of US OCTG distributors remain optimistic that pricing will continue to rise, with the Argus OCTG distributors index at a positive reading of 86 in July, down by 2 points from June and the fifth consecutive positive reading.
Multiple OCTG distributors reported sourcing difficulties in July for certain products that they would normally buy as imports and cannot find domestically.
