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The Oil Storage Crisis Is Far From Over

The Oil Storage Crisis Is Far From Over

Despite the tremendous comeback rally…

Shale Giant Calls For Federal Help As Oil Prices Fail To Bounce Back

Occidental Petroleum is opposing a Texas-wide mandated production cut, but it is asking the U.S. Administration for federal financial assistance for the U.S. oil industry which can’t make any money at $30 oil, Bloomberg reported on Thursday, quoting a letter to Congress that it had seen.

Oxy is looking for the U.S. government to “provide liquidity to the energy industry through this period of unprecedented demand destruction and unsustainable pricing until normal economic conditions return,” according to the letter linked in an April 7 email and seen by Bloomberg News.

In the letter, Occidental also called on U.S. lawmakers to talk with OPEC’s de facto leader and the world’s top oil exporter, Saudi Arabia, to end its feud with Russia, to seek fair access of U.S. oil on the Asian markets, and to back oil purchases for the Strategic Petroleum Reserve (SPR), Bloomberg reports.  

While Oxy is seeking government help for the U.S. energy industry, it is opposing ideas that the Texas Railroad Commission impose production restrictions in Texas.

“It is Occidental’s position that the surge in the supply of oil coupled with the decline in oil demand will resolve itself without state regulatory interference,” Bloomberg quoted Oxy as saying in a note to the Texas oil regulator. Production cuts in Texas would mess up contractual obligations and therefore, they would be “extremely short-sighted,” according to Occidental.

ExxonMobil also opposes production cuts in Texas, the U.S. supermajor said in a letter on Wednesday, as carried by Reuters.

The free market is “the most efficient means of sorting out the extreme supply and demand imbalances we are now experiencing,” Staale Gjervik, president of Exxon’s shale division, said in the letter to Texas regulators.

U.S. President Trump said this week he believes American oil production cuts would happen automatically thanks to the nature of the free market.

Texas Railroad Commissioner Ryan Sitton said on Wednesday that the U.S. would cut at least 4 million bpd in the next three months organically. Sitton said earlier that he was not going to take part in the OPEC+ call today, “but if I were I'd say at least 20mbpd in cuts are needed & the US will cut at least 4mbpd in next 3 mos organically. If nothing is done inventories fill up in 2mos, at which point the world will need to cut as much as 30mbpd.”

By Tsvetana Paraskova for Oilprice.com

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