Wow!!!! What a difference that events unfolding during the third quarter have had on the markets directly related to the oil industry both upstream and down stream. During the quarter, oil prices receeded to the low to mid $40s resulting in the industry contracting, losing 250,000 high paying jobs. The lost jobs have had a ripple effect on the economy by a factor of 15.

U.S. production is expected shrink by about 700,000 barrels per day (BBL/D) over the next three to six months with prices continuing to remain soft possibly returning to the low $40s to high $30s. However, prices are expected to make a correction and a return to $60 to $85 per barrel in 2016 and 2017. There is always the potential to have unintended consequences from low oil prices.

Saudi Arabia was challenging the U.S. producers by keeping production rate high with neither side willing to blink as production has outpaced global demand. China’s economy has declined considerably, resulting in a drop in demand for oil, exacerbating downward pressure on oil pricing. Additionally, the market is assuming Iran will start exporting oil soon.

Note that the forecast for the global supply and demand fundamentals will be changed very soon. Global demand is growing and the loss of some U.S. production will help rebalance the markets in the next few years. Saudi Arabia’s Ghawar Field is continuing to decline; and this decline will drain some of the excess production from the market.

Also, geopolitical events could jolt the markets as mayhem in the Middle East is expected to increase significantly over the next five years. Some observers are predicting a significant event to erupt within 18 months.

Despite the rough economic outlook for new construction, forecast starts are predicted to increase by 10% for the fourth quarter. Currently, new construction is 23% over 2014 on a year-to-date basis.

Basic raw-materials costs for seamless pipe, plate and rough forgings continue to show stability in both availability and price. This trend is expected to remain stable through the end of the fourth quarter. This pertains to both carbon steel welding fittings and forged steel flanges and high yield welding fittings and forged steel flanges. Yield exceeding Y/F 65 grades may seem longer lead time due to the complexity of the chemistry and available mill schedules.

As experienced in the third quarter, EPA regulations that have been proposed, uncertainty in Federal Reserve policy, uncertainty in the Middle East, and effect of low priced crude on production related businesses, it is extremely important to monitor the markets closely.

• The Gulf Coast kicks off with $23 billion in Southwest Projects during the fourth quarter. This includes Arkansas, Louisiana, Oklahoma and Texas. Most of the spending with be generated by energy related projects in Texas and Louisiana. Only one project is located outside these two states: Newkirk, Okla. will have $600 million start up of a 300-megawatt wind turbine plant utilizing Siemens wind turbine generators.

The bulk of the expenditures will be in four industries: Alternative Fuels, Power, Oil & Gas Production and Metals & Mineral.

Pineville, La. is looking at a $2.5 billion construction start tied to the Revolution Aluminum, L.L.C’s flat-rolled aluminum minimill from October through December.

• The Mid-Atlantic is expected to see about $11 billion in active project starts in the fourth quarter with more than 90% of the expenditures relegated to four industries: Industrial Manufacturing, Power, Pharmaceutical & Biotech and Metal & Minerals. This includes Maryland, North & South Carolina, Virginia and West Virginia.

Around $6 billion covering 82 project starts from October through December are expected in the Industrial Manufacturing Industry. The bulk of spending will be in the expansion of the passenger rail systems.

Power is in a strong second place with $2 billion with 43 projects scheduled for start-up during the fourth quarter. A $600 million combined-cycle gas turbine (CCGT) plant is set for construction start in Marshall County, W. Va. Another $450 million plant is scheduled to begin construction during the fourth quarter in Kings Mountain, N.C.

Pharmaceutical & Biotech comes in third with 31 projects valued at more than $1.23 billion scheduled for construction starts in the fourth quarter. Leading the pack is the $500 million Proctor & Gamble personal care and household products plant located in Martinsburg, W. Va. The U.S. Department of Defense’s Public Health Research Center in Aberdeen Proving Ground, Md. is a close send at $250 million scheduled to break ground during the fourth quarter.

Metal & Minerals comes in fourth with 10 projects valued at $820 million scheduled to begin construction from October through December of this year. A $1 billion project that has been delayed in the third quarter because of environmentalist opposition to a carbon fiber plant in Moore, South Carolina and has been set to begin contruction in the fourth quarter pending settlement of environmental issues.

• The Southeast: Alabama, Florida, Georgia, Mississippi and Tennessee host 10 projects valued at over $126 billion in capital spending. These projects are to be watched closely as plans are developing for nuclear power plants (Vogle) Waynesboro, Ga. and TVA’s Watts Bar NPS in Spring City, Tenn. Liquified natural gas projects including Kinder Morgan’s LNG Export Terminal and the expansion project in Pascagoula, Miss. are also projects to be closely followed.

In addition, Industrial Manufacturing is contributing $2.73 billion in projects set to begin construction in the fourth quarter. Anheuser-Busch InBev’s Aluminum Cans and Lids plant located in Jacksonville, Fla. estimated at $170 million, Samvardhana Motherson Group’s $150 million Automotive Parts Plant in Tuscaloosa, Ala., Global Energy Solutions $160 million Wood Pellet Mill in Epes, Ala. and Duke Energy’s Dry Cask Storage Addition in Crystal River, Fla. as just a few of the larger scale construction starts schedule for the fourth quarter.

The Power Industry comes in second with Duke Energy’s $750 million combined-cycle power plant located in Crystal City, Fla. has received final approval to move forward with construction.

Food & Beverage rounds out the major construction starts with a $200 million desalinization plant in Miami.

• The Northeast: New Jersey, Pennsylvania, New York and Delaware are tracking $7 billion in spending. Product manufacturing will see a photovoltaic solar sell manufacturing and LED lighting plant adding $150 million in project spending for the fourth quarter in Buffalo, N.Y.

Pharmaceutical-Biotech is always been a big contributor is in this region with much of Capx spending set for new-build construction, renovations or additions to research and development facilities.

The PVF Industry’s segment related to oil production will remain subdued as oil prices are expected to remain soft through the end of the year. On the refining side the market outlook is more optimistic as lower cost feed stock enhances profitability. Refineries are operating at near capacity and the need for retrofit should bolster the MRO business.

Natural gas prices also will remain soft through the end of the year. Low-cost natural gas has also been a positive for the chemical industry as the low cost of feed stock is drawing more manufacturing to the U.S.

There has been a dramatic reduction in demand for PVF products as the effects of oversupply and residing market demand for crude oil ripple through the economy. There is some light at the end of the tunnel as various sectors of our industry see growth through investments designed for the future.

Oil is predicted to remain below $60/BBL through 2016 as reported in the Wall Street Journal. This could change overnight as the crises in the Mideast continues to putrefy.

The low price for oil is a temporary phenomenon as the golbal markets seek a balance of supply and demand.