Texas Railroad Commission (TRC) Chairman Wayne Christian said during a TRC meeting on Tuesday that cutting oil production in the state would not help stabilise the market, so the decision to have proration was dismissed by the oil regulators.
“I don’t believe proration is the magic bullet that will save the industry,” Christian said. “A government-mandated cut in oil production, 20 percent across the board, will not have a significant impact on world supply.”
Christian said oil producers can determine for themselves what level of production is economical, adding that oil prices will stabilise when the novel coronavirus (COVID-19) pandemic is over.
Christian said the task force he created last month will provide recommendations to oil companies in Texas to help deal with the COVID-19-induced crisis, which they can consider, but will not be required to implement them.
Texas produces about 5 million barrels of oil per day, the most of any state in the United States.
ExxonMobil, Chevron, Occidental Petroleum and Marathon Oil have opposed proration and argued that Texas drillers were on track to cut spending on oil search and drilling by as much as 50 percent this year anyway.
US crude prices have fallen more than 65 percent on the year, trading on Tuesday at under $20 per barrel, while Brent, the global benchmark for oil, is down 60 percent at under $27 per barrel.