Exxon Mobil cuts budget, production amid industry slump

Exxon Mobil is slashing its budget in response to falling oil prices and is one of the latest companies to limit production as demand falls due to the coronavirus outbreak.

The oil giant announced Tuesday that it would cut its capital budget by 30 percent, some $10 billion, while cutting its operating expenses by 15 percent.

Oil companies rely on such budgets to drill new wells, an expensive activity key to keeping oil supply steady as existing wells dry up.

The news comes as the U.S. Energy Information Administration (EIA) forecast oil production would drop in April, potentially continuing through the rest of the year.

Exxon said the move “put us in the strongest position when market conditions improve.”

Their plans to scale back includes reducing operations in the Permian Basin, which spans Texas and New Mexico.

U.S. oil producers are particularly sensitive to a severe drop in the price of oil given their reliance on fracking — a more costly process than the one associated with oil derricks.

Fracking also brings more oil to the surface within the first year of the life of the well, making it tough for producers to wait out changes in the market.

A drop in production could help battle oversupply as a trade dispute between Russia and Saudi Arabia has led the countries to flood the market.

Though many companies are dropping production due to low prices, President Trump has floated forced production cuts, an idea resisted by many in the oil industry.

“Maybe we will, maybe we won’t, but we’ll have to make that decision,” Trump said Monday, despite saying he would allow the market to sort out the dispute as recently as Friday.

Reuters has reported that countries including Saudi Arabia and Russia may agree to lessen their oil production if the U.S. joined them. 

On Tuesday, lawmakers introduced a measure that would authorize $3 billion to be spent to buy oil for the nation’s Strategic Petroleum Reserve, an effort that would boost oil companies struggling to move their product.