Adds another comment from Sitton.
A plan to cut Texas' oil output by about 1mn b/d is "dead" and a planned vote on the measure tomorrow may not happen, a state regulator said.
"We probably are going to leave it to market forces," said Texas Railroad Commissioner Ryan Sitton, in a broadcast interview. "At this point, we are not going to prorate tomorrow."
The three-person Texas Railroad Commission is the lead oil and gas regulator in the state, and Sitton had been the commission's main proponent of a plan to order production cuts to help balance the oil market. Crude demand and prices tumbled in early March amid efforts to contain the Clovid-19 pandemic, and the market saw a further downturn on 20 April when WTI Nymex benchmark crude futures settled at -$37.63/bl, a historic first. Prices recovered into positive territory the next day. The front-month June WTI contract today was trading near $20/bl at 2:20pm ET.
Texas should have acted four to six weeks earlier and missed an opportunity to lead on the proration issue because the "political process has slowed this down," Sitton said. The US will be "the big loser in the global oil business" when demand returns to normal in a year or two with small independent, privately-owned producers being hurt the most, he said.
Sitton also took to Twitter to say that "prorationing will not be happening."
"I wish I could explain why so many Texans will lose their jobs while oil production drops in the US worse than anywhere else, but politics beats data, so there are no answers," he said in a Tweet. "Just ‘free market.'"
The Railroad Commission set the proration measure on its agenda for a possible vote tomorrow.
The chances of approval already took a hit last week after the panel's chairman Wayne Christian came out against any proration measure.
"I plan to stick to my free market principles and oppose proration in Texas," Christian said in an editorial.
The third commissioner, Christi Craddick, has voiced concerns about the legality of a proration plan.
The Texas Railroad Commission has been considering a production cut plan since receiving a joint request from Pioneer Natural Resources and Parsley Energy in March, arguing that the move was urgently needed to keep the industry afloat.
The proposed cuts are supported primarily by smaller producers that are in more precarious financial positions.
