Russia and Saudi Arabia flooded the market just as the coronavirus pandemic brutally suppressed energy demand. Crude storage capacity is filling to the brim. The Oklahoma Corporation Commission (OCC) has issued an emergency order reminding producers that Oklahoma bars production of oil that is “economic waste.”
In Texas, a petition to curtail oil production is pending before the Texas Railroad Commission (RRC). The petition suggests a 10% mandatory reduction in production across the board. The stated hope is that an RRC curtailment order will more evenly distribute the reductions rather than simply allowing prices to spur producers to cut back based on their individualized economic interests. There is also a view that a RRC curtailment order may spur other oil-producing states to do the same. All of this is said to be necessary to buoy prices enough to steel the industry against current conditions and prevent an inordinate number of bankruptcies.
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