The Texas oil and gas regulator, the Texas Railroad Commission, is meeting on Tuesday to hear testimony about potentially curtailing statewide oil production after U.S. oil prices plunged 300% to settle at -$37 a barrel on Monday.
The Texas Railroad Commission has already held a first hearing on possible mandated curbs in the oil-producing state home to the Permian Basin.
At last week's hearing, Pioneer Natural Resources and Parsley Energy were pushing for the first proration of oil production in Texas since the 1970s. Meanwhile, major companies, including ExxonMobil and pipeline operators, expressed opinions that the regulators should let the free market dictate the production in the state.
Smaller independent producers tend to support some kind of coordinated action to restrict supply, arguing that the free market will wipe out the smaller guys in the industry.
Enterprise Products Partners Co-CEO Jim Teague, for his part, told the Commissioners in his testimony, as carried by CBS7:
"Do you really think that a cut by Texas can fill a 25 million barrel demand hole?"
Today's meeting of the Texas Railroad Commission comes just a week after the previous one. Still, the market circumstances and sentiment are so much more dire this time, with WTI Crude oil prices sinking into negative territory for the first time in a 300% price crash on Monday. While the price collapse was driven by the expiry of the May futures contract today with traders running for the exit to avoid getting stuck with holding actual physical barrels for delivery with no place to store oil, the sentiment has spread to Brent Crude prices today, which plunged by 20% to $20 a barrel early on Tuesday.
Commenting on Monday's WTI Crude price crash, Texas Comptroller Glenn Hegar said in a statement:
"Today's market activity was unprecedented and likely indicative of very limited storage capacity. May contracts traded well into negative territory as the market prepares to shift focus to June contracts."
"While this unprecedented volatility is concerning, the greater impact to Texas will come if demand remains historically low for a prolonged period of time and supply gluts continue to strain storage capacity," Hegar said.
"A key question is whether we could see a repeat of this with the June expiry next month. It is likely that storage this time next month will be even more of an issue, given the surplus environment, and so in the absence of a meaningful demand recovery, negative prices could return for June," ING strategists Warren Patterson and Wenyu Yao said on Tuesday.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
Comments
Do these oil producers really need big government to tell them to stop drilling while they are PAYING PEOPLE TO TAKE THEIR OIL?
But I guess now it seems President Trump is charge of OPEC+, so....