US will organically cut oil production ‘at least 4 million bpd:’ Texas regulator
The US will cut at least 4 million barrels per day (bpd) of oil production over the next three months organically, according to a Texas oil and gas regulator on Wednesday.
Saudi Arabia, Russia, the US, and other top oil producers are due to start a series of meetings on Thursday to discuss a massive cut in production as oil markets face the worst glut in history. The coronavirus pandemic has caused an unprecedented drop in the use of oil worldwide, with leading analysts predicting a massive surplus of 28 million barrels in daily oil output this month.
“I’d say at least 20 million bpd in cuts are needed, and the US will cut at least 4 million barrels per day in next three months organically,” Ryan Sitton, one of three commissioners at the Texas Railroad Commission, the oil and gas sector regulator for Texas, said in a Tweet.
I'm not participating in the OPEC+ call tmrw but if I were I'd say at least 20mbpd in cuts are needed & the US will cut at least 4mbpd in next 3 mos organically. If nothing is done inventories fill up in 2mos, at which point the world will need to cut as much as 30mbpd. #OOTT— ryansitton (@RyanSitton) April 8, 2020
Sitton added that if cuts aren’t agreed upon, then global storage for crude will likely fill within two months, which would cause further declines in prices.
International Energy Agency head Fatih Birol echoed this sentiment on Friday, saying that deep oil output cuts would not prevent a huge increase in global crude inventories over the second quarter.
The commission is currently weighing for the first time in nearly 50 years whether Texas should curb crude production, a move that would have an enormous business and political impact.
Oil prices fell by around 50 percent last month as demand collapsed due to the coronavirus pandemic and a price war for market share drove up supply.
Historically, the commission allowed producers to pump to a percentage of the so-called maximum efficient rate of each well. The commission last imposed limits on Texas oil production in March 1972, when it allowed all wells in the state to flow at 100 percent of their rate for the first time since shortly after World War II ended.