Alberta Production Cuts Send Canadian Crude Soaring

Alberta premier announces 8.7 per cent oil production cut to increase prices

Alberta Premier Rachel Notley Orders Oil Production Slashed To Fight Price Crisis

He also mentioned that, with the price differential between Western Canadian Select and West Texas Intermediate, some companies are making a lot of money in the refining side of the industry, even if they're not making much in production. In fact, the price differential between Canadian oil and the USA benchmark oil hit a record high of $50 per month last month.

About 25 Alberta producers are expected to be impacted by the cuts until the 35 million barrels of oil now in storage are shipped out of the province.

"While Saskatchewan understands the action taken by our neighbours in Alberta to reduce the oil glut that is depressing the Western Canada Select oil price, the impact of the differential and how it is spread across our energy sector represents a different challenge to our province".

The top 20 producers account for the vast majority of Saskatchewan's oil production, totalling 441,717 bbls/d in aggregate.

"In the last few weeks, this price gap has reached historic highs", Notley said Sunday in a speech timed to run live on supper-hour newscasts in Alberta.

She says the glut in reserves driving down prices for Canadian oil to bargain-basement levels needs to be addressed before producers begin taking more drastic steps such as slashing capital projects or laying off workers. Canadian producers have for years accepted lower prices for their crude, particularly recently, as demand for high-sulphur, heavy crudes continues to weaken.

Notley says as of January there will be an 8.7 per cent reduction ordered in oil production.

For example, OECD inventories are showing continued buildups, while current expectations are calling for US shale companies to help boost total production above 12 million barrels a day next year.

"As proposed, the meeting agenda does not include any discussion on the crisis facing the energy industry and the price differential that is crippling the Alberta, Saskatchewan and Canadian economies".

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Alberta's oil is selling a markedly lower rates compared with the North American benchmark, due in part to oil pipeline bottlenecks.

"Some firms had already announced reductions in extraction ahead of the Alberta government's mandated production cuts which are set to take effect next year".

Alberta's oil industry is producing roughly 190,000 bpd in excess of available takeaway capacity.

The bounce helps to explain the Canadian dollar strength today.

"This is a short term measure", she said.

"If we used the similar type of ratios I think you'd end up with very little production being suspended or curtailed in Saskatchewan, and it would just be harmful to more of the municipalities and communities in the province". "For the long haul, pipelines remain the preferred and environmentally safer mode of exporting our energy resources out to Asian and US markets".

Calgary's major integrated companies - those that both produce and refine oil - including Suncor Energy Inc., Imperial Oil Ltd. and Husky Energy Inc., said in statements they remain opposed to the cuts.

More broadly, the slide in US oil followed a tumble in global stock markets on Tuesday, with investors anxious about the threat of a widespread economic slowdown.

Conversely, S&P Global Platts' Critchlow said Qatar's exit from OPEC is not only a "big" event, but likely the most impactful event over the past two decades.

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