Put oil 'crisis' on first ministers' agenda: Alberta, Saskatchewan premiers

Andrew Cummings
December 6, 2018

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

Above: Western Canadian Select oil price.

While producers said they would comply with the mandatory cuts, executives from Canada's Suncor Energy Inc., Husky Energy Inc. and Imperial Oil, integrated producers with domestic refinery and upgrading capacity, expressed disappointment.

The Trans Mountain expansion project, which would triple capacity to the B.C. coast, is now in legal limbo despite being approved two years ago as Ottawa revisits the impacts on First Nations and B.C.'s marine environment.

On Sunday, Alberta Premier Rachel Notley announced the province would implement a temporary 8.7 per cent production cut starting next month.

"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".

On Sunday both Cenovus and Canadian Natural issued statements of support for the Alberta move, as did Chinese-owned oilsands producer CNOOC-Nexen.

A wider-spread collapse in oil prices could wash away much of the gains from Alberta's production cuts, several analysts said Monday.

Notley is taking the reduction as a response to a crisis, Willliams says, one that isn't only affecting Alberta, but the entire country.

Western Canada Select (WCS) heavy blend crude typically trades at a discount to the West Texas Intermediate (WTI) benchmark, with the lower price reflecting the cost of transport and the quality of the product.

"There's such a surplus of oil in inventory right now that with the curtailment and stuff it should use up that inventory", says Petrone.

"What we now have is a serious glut in oil, which can't be resolved until OPEC gets together on Thursday and decides to cut back along with Russian Federation and a few other producing nations".

"We've got challenges with respect to pipelines, we've got challenges with respect to rail and now we've got challenges with respect to our demand market", Allan Fogwill, CEO of the Canadian Energy Research Institute said at a presentation in Calgary Wednesday.

Alberta's decision will "clear the supply glut a lot faster than it would have without intervention", Forrest noted.

Heavy oil prices sank to less than $15/bbl last month, as rising production swamped existing pipelines and rail routes, forcing some producers to shut in output.

- Canadian Dollar rises broadly as oil markets rebound on Monday.

"We will continue to work with industry to make sure that this curtailment is done in a way that is most effective, and that is responsible, and ensures that we don't curtail one extra drop more than we need to", said Notley.

On Monday, Alberta Energy Minister Marg McCuaig-Boyd said her government had been in contact with Saskatchewan.

"We are at an historically crucial point in terms of how tight this infrastructure is", Oberstoetter said.

Notley, meanwhile, has called on the federal government to step up.

The move is not unprecedented - in 1980, Tory premier Peter Lougheed forced oil production cuts to protest the federal Liberals' national energy program.

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