Crude oil storage in the United States is expected to hit full capacity by mid-May as refined product demand and US oil exports each slump by 30%, according to pipeline operator Plains All American Pipeline. Last week, the operator sent a letter to the Texas energy regulator to discuss a potential mandated output cut in the state amid plummeting global demand due to the pandemic.
Late last month, Plains began requesting oil producers to reduce output to prevent storage from running out quickly, which could cause a more severe blow in US oil prices. Data from the US Energy Information Administration indicated that US crude production had already fallen to below 12.4 million bpd.
Independent producers operating in the Permian Basin such as Parsley Energy and Pioneer Natural Resources have called for obligatory production cuts in Texas. However, the call received opposition from large producers, including ExxonMobil, Chevron, Occidental Petroleum, and Marathon Oil. The opposing side argued that production would fall naturally, in line with the free market mechanism.
