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Saskatchewan doesn't plan to follow Alberta's oil production cuts, says Moe

Saskatchewan doesn't plan to follow Alberta's oil production cuts, says Moe

Premier Rachel Notley is ordering a mandatory cut to oil production to deal with a price crisis she says threatens to gut Alberta's bedrock industry.

Western Canadian Select for January traded as much as $19.75 (U.S.) a barrel below USA crude futures early Monday, a $9.25 leap from Friday, before slipping back to a $23 discount. Western Canada Select (WCS) has plunged below $15 per barrel, representing a discount to WTI that has hovered at around $40 per barrel.

About 25 producers are expected to face cuts until 35 million barrels of oil now in storage are shipped out of Alberta.

Dan McTeague with GasBuddy.com says B.C. drivers shouldn't be anxious about to fill up their vehicles because our gasoline is made up of a blend of many different oils. "Ottawa's failure in this area has left Alberta's energy producers with few options to move their products, resulting in serious risks for the energy industry and Alberta jobs", the Alberta government says. Canadian producers have for years accepted lower prices for their crude, particularly recently, as demand for high-sulphur, heavy crudes continues to weaken.

A new threat looms for Canada's largest oil producing province, even as it imposes mandatory output cuts to ease a glut that has driven down crude prices.

The plan, which would end December 31, 2019, is expected to reduce the differential by at least US$4 per barrel relative to where it would have been otherwise.

Shares in the companies most likely to benefit from the move to curtail crude production from larger producers starting January 1 soared Monday as the price differential for heavy oilsands bitumen-blend fell. As such, some oil executives argued that only government action could provide an orderly way to reduce output to narrow price differentials. That will drop to an average of 95,000 barrels a day at the end of 2019 when Enbridge's new Line 3 pipeline should come into operation. The inability to build a major pipeline has put a ceiling on midstream capacity, and the bottleneck has swelled over time, ultimately leading to the latest announcement from Alberta ordering the shutdown of some oil supply.




Moe said Saskatchewan's oil industry differs from Alberta.

The production curbs will provide some cushion for producers, but will not eliminate the discount on heavy Canadian oil that has persisted for many years, said Jihad Traya, manager at energy consultancy firm Solomon Associates LLC in Calgary.

MacNaughton notes the production cuts are not universally loved within the industry and some unhappy players are likely in the ear of the USA administration.

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

Federal Natural Resources Minister Amarjeet Sohi said Monday he is asking the National Energy Board to make sure Canada's oil pipelines are being used as efficiently as possible. The government estimates Alberta is losing $80 million a day due to the discount. This is especially true if companies with their own USA refining capacity, like Husky Energy Inc., Imperial Oil Ltd. and Suncor Energy Inc., decide to squeeze their own workers till the pips squeak to punish the government for reducing their profit expectations for the greater good. Shares of oil producers operating in Alberta also surged, with Cenovus posting its biggest intraday gain ever. That's on top of mounting concern that the country's regulatory framework makes it very hard to get much-needed pipeline projects approved.

However, he says we should turn our eyes to the world stage.


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