Texas Railroad Commissioner: DoC adjustments bring stability to an energy market ‘in drastic need of it’

Vienna, Austria, 26 May 2020--Ryan Sitton, the Texas Railroad Commissioner who urged his state to adjust oil production, has praised the ‘Declaration of Cooperation’ (DoC) participating countries for their swift efforts to stabilize the global oil market.

The outcome of the 9th and 10th Extraordinary OPEC and non-OPEC Ministerial Meetings in early April “was a great move that brings stability to an energy market that was in drastic need of it,” said Sitton. The three-member Railroad Commission of Texas (RRC) oversees the regulation of oil and natural gas in the state.

Sitton called the outcome “a big move made and in a relatively short timeline”, adding: “From a global human rights perspective, it showed a willingness to work together when the chips are down, to bring stability to one of the world’s most fundamental commodities, which is energy.”

The 12 April agreement came amid a historic global economic and oil market collapse resulting from measures to halt the COVID-19 pandemic. The DoC countries agreed to adjust overall crude oil production down by 9.7 mb/d for May and June; by 7.7 mb/d from 1 July 2020 to 31 December 2020; and by 5.8 mb/d from 1 January 2021 to 30 April 2022. This was the largest ever production adjustment by DoC participants and the largest in the history of the oil industry.

Sitton added that cooperation among producers has expanded during the COVID-19 crisis and has become much broader.

“This is the first time a Railroad Commissioner had talked to the Russian oil minister, the OPEC Secretary General and the Albertan oil minister all in the same month”, Sitton said. “I think all of us are aware that these are really unprecedented times and we have to take unprecedented steps. And I think even though we [Texas] are not going to formally [adjust production], the fact that there was so much recognition of the challenges coming was important, and it was universal.”

Sitton hopes to see these collaborations remain if the other parties are willing.

“I hope these conversations continue, because this is going to be a challenge. The whole world relies on affordable, reliable energy to make the world go round. And the destabilization of that presents risks in every pocket of humanity.”

Sitton predicted the unprecedented market shock resulting from the pandemic will lead to a drop in US oil production of about 3-4 mb/d. His recommendation that the state consider a formal adjustment of 20 per cent of its oil output was not endorsed by the RRC because the market situation forced producers to make adjustments. About 40% of US oil output comes from Texas.

“What we’re watching happen is an interesting combination of collaboration by big oil producers, like Saudi Arabia and Russia, and also a pretty rapid market response due to the really detrimental pricing that we saw, and in the end it’s all probably going to bring it into balance,” Sitton said.

A full interview with the Commissioner will be published in the April/May edition of the OPEC Bulletin.

 

Ryan Sitton, Texas Railroad Commissioner

Ryan Sitton, Texas Railroad Commissioner