The morning after oil prices crashed into negative territory, Texas oil regulators on Tuesday decided against taking action to impose limits on oil producers, instead creating a "task force" to gather more information on oil production cuts as the coronavirus has kept much of the world at home, crushing global demand.
The Texas Railroad Commission, which regulates the state’s huge oil and gas industry, agreed to postpone until at least May 5 their vote on the issue, which has been widely discussed across the oil industry for weeks.
Tuesday’s public virtual meeting of the Texas Railroad Commission came a week after the three commissioners heard more than 10 hours of testimony from dozens of oil executives, analysts and critics. The three commissioners — Chairman Wayne Christian and Commissioners Christi Craddick and Ryan Sitton — had not indicated how they would vote, but on Tuesday only Sitton said he was ready to vote.
"Taking weeks, even days, right now to act is in itself a choice," Sitton said. "We are seeing a level of demand destruction and a level of oil industry downturn that in the past happened over a course of years, now happening over a course of days."
Sitton proposed a 20% oil production cut in Texas contingent on other states and countries following suit with production cuts of their own. Christian agreed that any cut the commission was to implement would likely need to be done in conjunction with other states and countries. Craddick had additional concerns.
"I'm not sure, by law, that some of what you're proposing is legal or not," Craddick said, emphasizing her desire to seek counsel from the Texas Attorney General’s office. "Look, I may be the only lawyer in the group but I’m telling you, this is going to the courthouse."
The United States has already agreed to cut oil production, part of a deal with other leading oil producing countries such as Russia and Saudi Arabia — the two countries who were locked in an oil price war that led to the Saudis increasing oil production as global demand cratered, which has already impacted Texas producers.
The group of countries agreed earlier this month to reduce oil production by 9.7 million barrels a day, as oil has no place to go since most of the world is at home practicing physical distancing measures. So far the deal has hardly helped, and it's unclear how a new agreement in Texas would help.
The state commission is expected to offer more clarity on possible solutions when commissioners reconvene on May 5.
"We need to respond," Christian said.