Texas Regulators Decline Production Cuts for Now
(Reuters) — The day after U.S. crude prices crashed into negative territory for the first time ever, Texas oil and gas regulators on Tuesday declined to force producers to curtail oil output for the first time since 1972.
Oil and gas companies have been gushing red ink and cutting tens of thousands of workers as prices tumble, prompting regulators in the largest U.S. oil-producing state to wade into global oil politics and consider some producers' calls for cuts. On Monday the May futures contract for U.S. crude closed at a negative $37.63 a barrel as traders desperate to avoid owning oil paid others to take it.
Two of three Texas Railroad Commissioners, Chairman Wayne Christian and Christi Craddick, said they wanted legal advice before starting production curbs and wanted the state attorney general to weigh in on their legality. Commissioner Ryan Sitton said he was ready to curb output by 1 million barrels per day, or 20%. The issue was likely to be discussed again at the May 5 meeting, the commissioners said.
The price crash was the "elephant in the room" Christian said at the start of the virtual meeting, adding the industry will recover once the coronavirus crisis passes. "It will not happen overnight," Christian said.
While the federal government has little power to influence oil production, state regulators like the commission have powers that can include limiting production in their state.
Last week, the three Texas commissioners held a 10-hour hearing based on a request by executives from shale producers Pioneer Natural Resources Co and Parsley Energy Inc. It ignited a debate between those favoring free markets and others who worry that without intervention, small producers could get shut out of oil sales as storage fills next month. Some firms have already started closing wells.
Some of the state’s largest and most influential oil companies, Exxon Mobil Corp and Chevron Corp have opposed production limits.
The three elected commissioners, all Republicans, have not indicated how they will vote.
Texas regulators set oil output limits from the 1930s through 1972, when Texas oil production went into a long decline.
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