(Reuters) - The largest U.S. oil producer Exxon Mobil Corp on Wednesday said it opposes Texas energy regulators mandating any oil production cuts in the face of plunging energy prices.
Exxon is the latest large oil company to oppose the idea of curtailing oil output, calling the free market “the most efficient means of sorting out the extreme supply and demand imbalances we are now experiencing,” in a letter from Staale Gjervik, president of Exxon’s shale division to state regulators. Chevron Corp and Occidental Petroleum have also opposed a coordinated pullback in Texas oil production.
U.S. energy companies are losing money on oil production, cutting tens of thousands of workers, and some are struggling to obtain financing. Texas producers have been hurt as oil prices have crashed two-thirds this year. Last month alone, prices fell by half, to near $20 a barrel, as the coronavirus slashed fuel demand.
The state’s Railroad Commission, which has the authority to mandate production curbs in the state, will consider next week a proposal to require larger oil producers to cut output by 20% beginning May 1.
The proposal was submitted by shale producers Parsley Energy Inc and Pioneer Natural Resources Co, and backed by Commissioner Ryan Sitton, who has said the idea should be considered as a way to curb a free fall in crude oil prices, stabilize the industry and prevent smaller firms from being locked out of storage and the sales by the largest oil companies.
The state’s two other commissioners took to Twitter last week to distance themselves from Sitton, saying they had not yet made up their minds. Passage requires two of three to agree on curbs, which would be the first by the state in nearly 50 years.
Over the past few years, Texas regulators championed the state’s soaring oil and gas output as Russia and the Organization of the Petroleum Exporting Countries (OPEC) cut production to bolster global prices. State law allows Texas to take steps to limit local production, but it has not done so since the 1970s.
“Proposals to impose quotas or mandatory production cuts will lead to unintended consequences for the state to the benefit of competing states in the U.S. and countries abroad,” Gjervik said.
Reporting by Jennifer Hiller; editing by Diane Craft