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Early Tuesday morning in Asia, the Financial Times (FT) came out with the news suggesting that a Texas regulator has dropped an effort that could have the oil production based on decades-old state rules. The reason cited in the news was the opposition from leading energy companies.

Key quotes

The Texas Railroad Commission, which regulates oil and gas in the state, was to have considered the proposal at a hearing on Tuesday, but was now likely to pass on the matter, people at the commission said.

The proposal would have resurrected rules giving the commission, known as the Texas RRC, the authority to ‘proration’ supply to prevent ‘waste’. In this case, most operators would have been forced to cut 20 percent of their output or pay fines on any excess barrels.

Texas’s oil production is already falling steadily as producers idle rigs in the face of a demand collapse caused by coronavirus lockdowns.

Market implications

The news fails to provide any immediate negative impact on oil prices. The WTI Futures for June month on NYMEX begins Tuesday’s trading session on the positive side, also extending the previous four-day winning streak. The oil benchmark currently trades around $21.30, up 4.30% on a day, within a few minutes of the start.