Texas Will Not Mandate Oil Production Cuts
HOUSTON (Reuters) - Texas energy regulators on Tuesday said they will not mandate oil production cuts, ending a month-long debate about whether they would wade into global oil politics for the first time in 50 years as crude prices cratered.
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.
Oil prices surged Tuesday, with U.S. crude futures rocketing 20% on hopes a recovery in vehicle traffic will boost fuel demand as some U.S. states, as well as countries in Europe and Asia, start to ease lockdowns. West Texas Intermediate, the U.S. benchmark, rose $4.17 to settle at $24.56 a barrel.
Even with recent increases in futures, however, local prices are still below the cost of production for some oil companies.
The severe price downturn last month prompted State Railroad Commissioner Ryan Sitton to push the idea of production cuts 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.
But a motion to consider widespread production curbs, called proration, was dismissed on Tuesday by a 2-1 vote.
"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.
Pioneer was disappointed, said Chief Executive Scott Sheffield.
"Pioneer continues to believe that proration offered important benefits to the Texas energy industry, given the unprecedented combination of demand destruction due to COVID-19 and market oversupply," Sheffield said.
Many companies, including Chevron Corp, Exxon Mobil Corp and Occidental Petroleum Corp, have taken steps to cut hundreds of thousands of barrels per day (bpd) of shale output, ahead of any state action.
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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