Liz Hampton | Reuters

Oklahoma’s energy regulator said on Wednesday that oil producers could close wells without losing their leases, the first victory for struggling U.S. companies seeking relief from states after the market crash.

Several U.S. states have considered aiding oil companies, many of which were already hurting before demand tanked during coronavirus pandemic lockdowns. That, and ballooning supply, sent U.S. prices into negative territory for the first time ever on Monday.

In an emergency order, the state energy regulator said oil companies could consider their unprofitable production economic waste, allowing oil and gas producers with money-losing wells to retain leases that could otherwise be voided if they halted output.

“There was no way for Oklahoma and other U.S. producers to anticipate and plan for up to 30 million barrels per day of consumption to disappear within just a few weeks,” Oklahoma Corporation Commissioner Dana Murphy said in a statement.

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Chris Polansky | Tulsa Public Radio

Oil Market Turmoil Likely To Have Economic Repercussions On Both State And Local Levels

Former Tulsa mayor Dewey F. Bartlett Jr. has seen a lot over his decades in the oil and gas industry, but he said he’s never seen anything like this week’s market turmoil, and never thought he would.

“Never,” Bartlett said. “Not to this degree, and not this quickly. Not even close.”

“It’s as bad as it seems.”

Bartlett said that the current crash, in which the price of West Texas Intermediate crude plummeted to below zero dollars a barrel for the first time in history, will have significant impacts across varied sectors and levels of Oklahoma’s economy, including philanthropy and municipal services.

“The oil and gas industry has normally been very generous with their donated funds,” Bartlett said. “But when companies are suddenly hit with a tremendous decrease in their revenues, they’re going to start cutting costs. And one of the first things they’re going to start cutting are donated dollars. They can’t afford it.”

Bartlett said that the plunge in prices will also likely lead to layoffs not only in the energy industry but also in adjacent industries, such as manufacturing and transportation. That increase in unemployment across the state, Bartlett said, will contribute to a decrease in sales tax revenues collected by localities.

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Eunice Bridges | Argus Media

Texas regulators postponed a vote on a proposal to cut the state’s oil output by 1mn b/d, saying they want to further explore legal issues.

But the Texas Railroad Commission, the top oil and gas regulator in the state, seemed open to some kind of proration plan in conjunction with cuts by other states and countries. A vote could come in two weeks.

Commission chairman Wayne Christian said he has been meeting with state officials in North Dakota, Oklahoma and Canada on how to address the current crisis in the oil and gas industry. The matter has become even more urgent after WTI Nymex benchmark crude futures tumbled yesterday to settle at -$37.63/bl, a historic first, as rapidly filling US storage created a panic, prompting traders to unwind their positions.

Commissioner Ryan Sitton was seeking a vote today on a proration plan to cut 20pc of Texas production, or 1mn b/d, starting in May. Cuts would be contingent on other states and countries, including members of Opec, curtailing a combined total of 4mn b/d. “I don’t believe that inaction on our part is acceptable,” he said.

Sitton said his plan would cut production by operator, not by lease, with a base set at the highest producing month from October to December. The plan would be temporary and end when global market demand rises above 85mn b/d. He also said cuts would only apply to producers with output exceeding 1,000 b/d.

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Scott Gibson | Stock News Press

The worldwide oil benchmark, Brent crude, wobbled on Monday, despite the historic oil production cut deal sealed by the Organisation of Petroleum Exporting Countries and its allies on Sunday.

This weekend’s OPEC+ deal to slash production by 9.7 million barrels a day amounts to the largest coordinated cut in history, but the decision doesn’t go into effect until May and is still dwarfed by the decline in oil consumption as the coronavirus pandemic keeps multiple countries in lockdown.

“This historic action will help almost 11 million American workers who are supported by the U.S. oil and gas industry”. “Even after the tentative reopening of economies, it is still going to be quite challenging for OPEC to match their supply to the actual demand for oil”. Oil prices ended up falling again on Tuesday, as did the value of Norway’s currency, after widespread criticism that the cuts already agreed aren’t big enough.

“The big Oil Deal with OPEC Plus is done”, Trump tweeted on Sunday.

“Providing our storage for these US companies will help alleviate some of the stress on the American energy industry and its incredible workforce”.

How significant is the USA involvment?

Will OPEC deal be respected? . The kingdom released May’s prices earlier this week, deepening the discounts to most markets, especially Asia, where the cut was greater than expected.

WASHINGTON-Oil-producing nations reached an agreement over the weekend to reduce output by a record amount, ending a weeks-long price war between Saudi Arabia and Russian Federation that devastated oil markets.

What exactly did the United States bring to the table?

Trump said Monday that the cuts may be deeper than the headline figure – with top producers considering slashing output by 20 million barrels a day under the deal.

“But Yergin said: “(Trump) came to see this as a national security issue, also an employment issue, and a very important factor in the USA economy … and he just jumped in”. The U.S. was conspicuous as a hold-out on global output curbs, instead leaving it up to individual companies to steer production decisions.

The next major focus for markets will be numbers from the U.S. Department of Energy on its strategic petroleum reserves (SPR). “I think it will serve the president well on every count”, including border issues, she said.

“If they lose that group of senators you start to see veto override majorities on legislation that deals negatively with the Saudis”, Sullivan told a small group of congressional reporters. In brokering this deal, he proved that the U.S. President can still convene powerful countries around a table to make a deal.

Could force production cuts work in the US?

America’s Energy Information Administration (EIA) forecasts that USA “crude oil production will average 11.8 million b/d in 2020, down 0.5 million b/d from 2019”. But this grand bargain won’t help oil producers as much as they would like.

According to Yergin, the national security implications of the price war on the US oil industry have prompted Trump to step in.

“We’re not suggesting that Oklahoma can balance the market, we can’t do that”, said Mike Cantrell, owner of Cantrell Investments LLC, an oil and gas investment group based in Oklahoma. But statewide, production has declined about 20% this year, the equivalent of about 100,000 barrels a day – a cut similar to Mexico’s. If sustained, “that would be a cut that would be a significant cut in the world scheme of things”, he said.

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