Texas oil hearing shakes hornet’s nest as regulators offer no clue

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HOUSTON (Reuters) – Texas energy regulators listened to senior executives on Tuesday asking whether the state should cut oil production by 1 million barrels a day, but did not say how they could vote after more than 10 hours of sometimes disastrous testimony.

FILE PHOTO: A pump cylinder on a lease owned by Parsley Energy operates in the Permian Basin near Midland, Texas, United States, August 23, 2018. REUTERS / Nick Oxford

Oil and gas companies throw red ink and kill tens of thousands of workers as oil prices plummet, prompting regulators in the largest US oil-producing state to engage in global oil policy and to consider calls for cuts. In the United States, prices for CLc1 crude oil fell to less than $ 20 a barrel at one point, a low of almost 18 years.

While the federal government has little power to influence oil production, many state regulators like the Texas Railroad Commission have powers that can include limiting production across the state.

The hearing, based on a request from the leaders of shale producers Pioneer Natural Resources Co (PXD.N) and Parsley Energy Inc (PEN), sparked a debate between those who favor free markets and those who fear that without intervention, small producers could withdraw from oil sales as storage fills next month. Some companies have already started to close wells, several executives said.

The industry is facing a historic economic collapse with $ 3 a barrel to $ 10 a barrel of oil in the coming weeks, Pioneer chief executive Scott Sheffield warned on Tuesday.

“The demand will not come back in force,” he said.

Kirk Edwards, president of the small producer Latigo Petroleum, argued that uniform reductions could help thousands of businesses like his to continue selling part of their oil production.

But producers have cut spending by up to 50% and production has already started to fall, said Lee Tillman, CEO of Marathon Oil Corp (MRO.N), who objected to state-imposed reductions, arguing that the market is dealing with glut.

The commissioners are expected to vote on the oil companies’ motion on April 21.

The hearing was held a few days after the Organization of the Petroleum Exporting Countries and its allies agreed to cut production by 9.7 million barrels per day (b / d) in May and June.

However, the US crude CLc1 futures contract continued to drop this week as traders bet the historic OPEC deal was not large enough to counter the destruction of oil demand caused by the restrictions. travel related to coronaviruses and activity stoppages.

It takes at least two votes on the Texas Three Railways Commission to adopt the proposal. Commissioner Ryan Sitton lobbied to assess statewide cuts. Wayne Christian and Christi Craddick, were careful not to reveal how they could vote, although Christian said on Tuesday, “the hardest thing I can think of in my life is sitting and doing nothing, and yet it is sometimes “what is necessary.

“What if other states don’t?” Craddick asked at one point in the hearing, suggesting that Texas could send oil revenues to neighboring states.

Some of the largest and most influential oil companies in the state, Exxon Mobil Corp (XOM.N), Chevron Corp (CVX.N) and Occidental Petroleum Corp (OXY.N), opposed the imposition of limits, alongside some of the largest professional organizations.

The idea, however, has gained supporters elsewhere. A group of Oklahoma oil producers has filed with that state a request for a hearing to review the production restrictions. It is scheduled to take place on May 11.

The Executive Chairman of Continental Resources Inc (Oklahoma) (CLR.N), Harold Hamm, said at the Texas hearing that he “would not oppose” the Oklahoma cuts and urged Texas regulators to consider cutting production by 25%.

Jennifer Hiller reports in Houston; Editing by Paul Simao, Jonathan Oatis and Richard Pullin

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