FILE PHOTO: An oil pumpjack is seen in Velma, Oklahoma U.S. April 7, 2016. REUTERS/Luc Cohen/File Photo
(Reuters) – Oklahoma’s energy regulators on Monday began hearing arguments from producers seeking to win state-support for setting limits on oil production to help stabilize prices.
U.S. oil futures CLc1 this year have fallen about 60% to under $25 a barrel CLc1 as coronavirus-related lockdowns have crushed demand for fuel. The price collapse has companies in major oil-producing states push for regulatory action to stave off further declines.
Oklahoma last month adopted an emergency order that said some oil production could be considered economic waste. That emergency order allowed operators to opt to shut wells without losing valuable leases.
On Monday, regulators heard proposals seeking to declare oil production in the state waste, and a plan submitted by trade group Oklahoma Energy Producers Alliance that would mandate production cuts.
“We’re floating out there in dangerous waters,” said Lee Levinson, owner of LPD Energy Company LLC, which submitted the order requesting some output be considered waste.
“It’s critical we get this done for the benefit of the operator,” he said.
Oklahoma has some of the highest production cost in the country. Breakevens in its SCOOP (South Central Oklahoma Oil Province) and the STACK (Sooner Trend, Anadarko, Canadian and Kingfisher) plays are roughly $48.19 a barrel, versus about $40 a barrel in the Permian basin, according to an analysis by Deutsche Bank.
Last week, Texas regulators struck down a proposal to mandate output cuts.