Canada's Alberta province orders drastic oil production cuts to fight price crisis
- Author: Eleanor Harrison Dec 07, 2018,
Dec 07, 2018, 1:28
Alberta's plan appears to be carefully devised, he said, and even if rising prices cause American refiners to grumble, they'll continue to take Alberta oil because they're facilities are set up for it.
"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".
Dave is joined by Calgary Herald business columnist Chris Varcoe.
The price differential between Western Canadian Select and West Texas Intermediate has fluctuated in recent weeks, peaking at around C$45 a barrel.
The Railroad Commission of Texas did something similar in the 1930s, before OPEC was created, because large oil producers at the time were anxious that independent drillers were over-supplying the market. "We need Ottawa's full attention", Notley said prior to a cabinet meeting Monday morning.
David MacNaughton says no one in the US government has raised Alberta Premier Rachel Notley's move with him. WCS now stands at around US$29 a barrel, and sells at a US$23.85 discount to the USA benchmark, a sharp improvement from a record US$50 differential earlier this fall.
Notley expects the production cuts to boost prices for WCS by roughly $4 per barrel, adding $1.1 billion to government revenue between 2019 and 2020.
"Many of these policies (were) supported either by acquiescence or actively by the NDP government", said Kenney.
But the president could take action if he becomes concerned with climbing prices, Mar said. "But we think this is a good way to allow for that flexibility that's needed and that exists within the industry to accommodate these changes", she said.
The Canadian Dollar rose broadly Monday as oil prices recovered from 2018 lows but developments in the domestic market have just dented the growth outlook and could have negative consequences for the currency over the coming months.
Alberta Premier Rachel Notley and her cabinet have put the legal wheels in motion to begin cutting oil production.
Alberta's representative in the US capital for four years from 2007, said it's uncertain how Trump will feel about the province's decision to wade into the free market in a bid to raise crude prices. Larger producers will see their first 10,000 barrels exempted each day. The restriction will come into effect in January and will be in place until December 31, 2019. Whitecap Resources Inc. wasn't part of these consultations, but Fagerheim said he admires how much the provincial government does consult with the industry.
But he said Notley's government has played a role in creating the problem by not pushing back as the federal government cancelled the Northern Gateway pipeline to B.C. and introduced legislation that industry leaders say will make it more hard to get oil megaprojects approved.
Canadian heavy crude strengthened the most since June.
Alberta's decision to order oil production cuts will weigh on Canada's economy next year, according to some of the country's biggest lenders.
Alberta estimates the province is now over-producing by about 250,000 bpd. Small producer Whitecap Resources Inc. now doesn't plan to cut any jobs as a result of the Alberta plan, Chief Executive Officer Grant Fagerheim said in an interview.
Price differential: Canada's heavy crude usually trades at a discount because of refining and transportation costs, so a price gap or differential is typical between WTI and WCS.