Exxon to cut US production of oil in response to oil price plunge
Petrochemical giants including Exxon Mobil Corp. and Petronas Plc are planning to reduce production in the US in response a steep drop in the price of oil.
The move follows Exxon Mobil’s announcement earlier this month that it will cut its US production by 30 percent to 3 million barrels a day.
In a letter to the company’s shareholders this week, Petrona’s CEO Philip Tetrao said the US will be hit hardest by the sharp drop in crude oil prices.
“The global economy is moving in a direction that is unlikely to continue,” he wrote in the letter.
“As we work to avoid this situation in the future, we must make every effort to continue to support and invest in our global operations.”
A spokeswoman for Petronos parent, Petropav, did not respond to requests for comment.
Tetraos letter comes as other companies have also warned that they will cut production in response.
Exxon Mobil has also said it will halt its operations in the United States for the rest of the year.
“We are not planning to resume operations,” the oil giant said in a statement on Monday.
“While we have been experiencing a sustained drop in oil prices, we remain optimistic that we will see some recovery in coming months.”
Petronos CEO Philip T. Tetras letter follows a similar letter from Exxon Mobil CEO Rex Tillerson.
In that letter, Tillerson said the company was facing a tough economic environment and a potential recession in the next several years.
Tets letter to shareholders came as other energy companies have announced that they are also planning to cut production.
In the letter, Tetraoi said that Exxon Mobil was planning to slash its US operations by 30 to 40 percent to 2 million barrels per day.
“Petrochemical companies will continue to be a significant part of our business and our future success,” Tetraoes letter said.
The move by Exxon is a reaction to the plunging price of crude oil, which has plunged to more than $100 a barrel in recent weeks, and a decline in production at other petro-chemical companies in recent months.
According to data from data company Baker Hughes, US petro companies saw their crude oil production drop 2.6 percent in March to 6.5 million barrels.
Petrochemical companies are increasingly being squeezed by lower prices, as they struggle to keep up with surging demand for their products and as the market recovers from the aftermath of the Great Recession.
Last month, Exxon Mobil announced it will slash its production by 25 percent to 4 million barrels to avoid a collapse of oil demand in the years ahead.
It also said that it would cut production at Petropastas, Petroleos de Venezuela SA, Petrometro SA and Petromas SA in response and other petrol companies around the world are planning similar cuts.
“Petro chemical companies have a significant role to play in our economies.
They play a vital role in providing fuel to the transportation sector, manufacturing our products, and in our production capacity.
They also play a crucial role in our energy mix, providing more than 50 percent of our oil supply,” Tetras statement said.
“Our investment in our petro chemical operations will help our business to compete effectively in the long term and provide additional jobs in the coming years.”
As prices of oil continue to decline, the industry is facing a slump in demand for petro chemicals.