Texas declines to mandate oil production cuts
Mandated cuts would have been a first in 50 years
Treasury Secretary Steven Mnuchin says there will be no financial aid package for the oil companies amid the coronavirus and that it will eventually rebound.
HOUSTON (Reuters) - Texas energy regulators on Tuesday said they will not mandate oil production cuts, ending a month-long debate about whether or not they would wade into global oil politics for the first time in 50 years as crude prices crater to historic lows.
Global energy demand has tumbled amid coronavirus-related travel and business restrictions and a glut of oil from shale. U.S. crude collapsed to minus $37 a barrel on April 20. Even with recent increases in futures to $24, local prices are still below the cost of production for some oil companies.
The turmoil prompted State Railroad Commissioner Ryan Sitton last month to push the idea after Parsley Energy Inc and Pioneer Natural Resources Co asked regulators to mandate 20% curtailments, or 1 million barrels. Sitton promoted the curbs on Twitter and TV and won audiences from OPEC Secretary General Mohammad Barkindo and Russian Energy Minister Alexander Novak.
The sun sets behind an idle pump jack near Karnes City, Texas, April 8, 2020. (AP Photo/Eric Gay)
But the idea never won support from the other two commissioners, and at least two votes were needed for approval. A motion to consider proration was dismissed on Tuesday by a 2-1 vote.
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"The industry and the market move a lot faster than we can as a regulatory body," Commissioner Christi Craddick said.
Other states and countries have not acted to cut additional output, which would have Texas "on our own with this," Commission Chairman Wayne Christian said.
Many small and large companies, including Chevron Corp, Exxon Mobil Corp and Occidental Petroleum Corp, were already planning to cut hundreds of thousands of barrels per day (bpd) of shale output, well ahead of any state action.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| CVX | CHEVRON CORP. | 160.76 | +0.97 | +0.61% |
| XOM | EXXON MOBIL CORP. | 120.33 | +0.98 | +0.82% |
| OXY | OCCIDENTAL PETROLEUM CORP. | 50.91 | +0.94 | +1.88% |
Texas is the largest U.S. oil-producing state, pumping about 5.4 million bpd of crude. Last year, its output rose by 600,000 bpd, to about 41% of the nation's total.
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The curtailment proposal led to a more than 10-hour hearing in April, revealing an industry divided. But many of the biggest trade organizations and producers, such as Exxon and Chevron, staunchly opposed the cuts.
Commissioners instead on Tuesday waived some fees, loosened some rules about well plugging and voted to allow storage of crude oil in formations other than salt domes. Storage is filling up this month as supply continues to outstrip demand and the ability of refiners to process crude.
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After several producers and environmental groups raised the issue in the past month, Christian also asked the state's major trade organizations to come back with suggestions before its June meeting for how to address high levels of natural gas flaring in the state's oil fields.
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(Reporting by Jennifer Hiller; Editing by Marguerita Choy)