By Jennifer Hiller
HOUSTON (Reuters) – The day after U.S. crude prices crashed into negative territory for the first time, Texas oil and gas regulators on Tuesday declined to force producers to curtail oil output for the first time since 1972.
Oil and gas companies have been gushing red ink and cutting tens of thousands of workers as prices tumble, prompting regulators in the largest U.S. oil-producing state to wade into global oil politics and consider some producers’ calls for cuts. On Monday the May futures contract for U.S. crude closed at a negative $37.63 a barrel as traders desperate to avoid owning oil paid others to take it.
Two of the three commissioners of the Texas Railroad Commission, Chairman Wayne Christian and Christi Craddick, said they want the state attorney general to weigh in on the legality of production curbs. Commissioner Ryan Sitton said he was ready to cut output by 1 million barrels per day, or 20%. The issue is likely to be discussed again at a May 5 meeting.
The state could become tangled in years of legal battles over curtailments, said Craddick, an attorney. “I still have some questions I believe need to be answered,” she said at a meeting.
No commissioners were willing to have Texas alone curb output. Christian spoke this week with the Canadian oil minister and officials in North Dakota, he said. Oklahoma energy regulators are also set to consider a proposal to curb output.
“It would be much more powerful to move in conjunction with other states,” Christian said.
Only Sitton, who for weeks has pushed the idea of output cuts, said he was ready to vote. “Taking weeks or even days right now to act is in itself a choice,” Sitton said.
While the federal government has little power to influence oil production, state regulators like the Texas commission have powers that can include limiting production in their state.
Last week, the three Texas commissioners held a hearing based on a request by executives from shale producers Pioneer Natural Resources Co and Parsley Energy Inc. It ignited a debate between those favoring free markets and others who worry that without intervention, small producers could get shut out of oil sales as storage fills next month. Some firms have already started closing wells.
Some of the state’s largest and most influential oil companies, Exxon Mobil Corp and Chevron Corp have opposed production limits.
Texas regulators set oil output limits from the 1930s through 1972, when the state’s oil production went into a long decline.
(Reporting by Jennifer Hiller in Houston; Editing by David Gregorio and Matthew Lewis)