(Reuters) - A group of Oklahoma oil producers plans to formally file a request calling on energy regulators in the fourth-largest U.S. oil-producing state to impose production curbs.
The Oklahoma Energy Producers Alliance (OEPA) will file in coming days an application asking state regulators to hold a hearing on production cuts, which it has not specified. Last week, the group sent a letter to regulators seeking help.
“They’re fiddling while the industry is burning to the ground,” said Mike Cantrell, a member of the OEPA’s executive committee. It “will require them to hear the case for using pro-rationing” to limit production, he said.
U.S. oil prices have tumbled this year as the COVID-19 pandemic has pushed the global economy toward recession and top producers flooded oil markets in a grab for market share.
The Organization of the Petroleum Exporting Counties (OPEC) is due to meet on Thursday to address the global oil glut. OPEC officials have said they want the United States and other countries to contribute to coordinated production cuts.
The Oklahoma request follows a similar move in Texas, where producers Parsley Energy and Pioneer Natural Resources, called on the state to require 20% production cuts from larger producers. That request is scheduled to be heard on Tuesday.
On Wednesday, Texas Railroad Commissioner Ryan Sitton estimated U.S. producers would cut “at least 4 mbpd in the next three months organically,” or about a third of the total U.S. output. Sitton, one of three members of the Texas energy regulator, has suggested Texas reduce output by 500,000 barrels per day.
Oklahoma has not used its authority to limit oil production in many decades. The commissioners could do so through their own legislative authority, or through a judicial process, which the OEPA plans to pursue.
Oklahoma producers have some of the highest cost of production in the United States. New wells in the state’s SCOOP and STACK formation on average require $48 a barrel to eke out a profit, according to an analysis by Deutsche Bank.
Texas regulators will hear arguments on the Parsley/Pioneer motion next week. It has drawn mixed reactions with Occidental Petroleum and Exxon Mobil opposing the proposal and smaller companies in favor.
Texas requires two of three commissioners to pass any production cuts. Two last week indicated they had not yet made up their minds on the issue and rebuked Sitton for suggesting the commission was behind the proposed cuts.
Reporting by Liz Hampton and Jennifer Hiller in Houston; Editing by Cynthia Osterman
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