Texas companies ask authorities to cut production in the US to save the industry

Two of the largest oil producing companies in the US state of Texas have asked the local regulator to consider reducing oil production after a historic drop in prices, Bloomberg reports.

Two of the largest oil producing companies in the US state of Texas have asked the local regulator to consider reducing oil production after a historic drop in prices, Bloomberg reports.

Pioneer Natural Resources and Parsley Energy have asked the three-person Texas Railroad Commission to convene an emergency meeting via video link no later than April 13 and issue an order establishing “reasonable market demand for oil from Texas” in May, according to the five-page letter.

Ryan Sitton, one of the members of the commission, said earlier that the regulatory body will discuss the issue of limiting oil production at its next meeting.

“We need strong government action because we know that operators cannot negotiate equally,” Matt Gallagher, chief executive of Austin, Texas—based Parsley Energy, said in an interview.

According to Gallagher, a couple of shale producers believe that a 20% reduction in production in the state would be most beneficial for the industry.

Crude oil producers are facing a rare combination of falling demand and a sharp increase in supplies as Saudi Arabia and Russia compete for market share amid the COVID-19 pandemic.

Oil futures have fallen to their lowest level in almost two decades amid an outbreak that has dealt a blow to the global economy.

“Taking this measure at the state level, I think, will help to have discussions at the international level with our federal government,” Gallagher said.

Gallagher also noted that his biggest concern is that if the US energy industry falls to complete inactivity within a couple of months, it will hit the oilfield services industry so hard that companies will never be able to recover.

The US has already lost the ability to produce 13 million barrels a day, again creating the risk that the country will become more dependent on imports, he said.