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

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

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

Unlike Alberta, 60 per cent of Saskatchewan oil isn't subject to the price-differential questions. However he promised to work with industry so as not to undermine Alberta's efforts. Canadian producers have for years accepted lower prices for their crude, particularly recently, as demand for high-sulphur, heavy crudes continues to weaken.

Because of that, Alberta, which is the heart of Canada's oil sands region, ordered producers to cut output by 325,000 BPD until oil storage levels there start falling, which represents 8.7% of the country's current production rate.

Now, the government in Alberta is in talks to purchase enough rail cars to move 120,000 bpd out of the province.

The glut: Alberta says about 190,000 barrels of raw crude oil and bitumen are being produced each day that can't be shipped out. The cuts will then drop to 95,000 bpd until December 31, 2019. In fact, the price differential between Canadian oil and the USA benchmark oil hit a record high of $50 per month last month.

But U.S. President Donald Trump threatened on Tuesday to place "major tariffs" on Chinese goods imported into the United States if his administration didn't reach a desirable deal with Beijing.

"The price gap is caused by the federal government's decades-long inability to build pipelines".

David MacNaughton says no one in the USA government has raised Alberta Premier Rachel Notley's move with him.

Canada has the world's third-largest oil reserves and is the top source of foreign oil for the U.S.

A lack of access to markets is one of the reasons the Western Canadian Select price has dropped.

The provincial government went to lengths to describe the measure as temporary, and one that will be a benefit to government finances.

But the Court of Appeal sided with environmentalist and indigenous opponents of the project in an August ruling, leading the federal government to give up fighting and darkening the outlook for investment, oil prices and the Loonie.

"We expect that with the forcibly shut-in production, that differentials will narrow back towards rail-based economics", Canaccord Genuity said in a note Monday, which is about $20 to $25 a barrel below West Texas Intermediate futures. Alberta is now looking to buy trains to move oil out of the province. In the meantime, the WCS discount of around $40 per barrel is probably too much to bear for many oil producers.

"You get there by next spring, which is very quick", said Michael Tran, analyst at RBC Capital Markets in NY.

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

Saskatchewan's market is significantly different than that of its neighbour, Moe said. The impact on timing remains unclear.

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. That's on top of mounting concern that the country's regulatory framework makes it very hard to get much-needed pipeline projects approved.

The Saskatchewan government will not be following Alberta's lead when it comes to cutting oil production in the face of plummeting prices.

The Pound-to-Canadian-Dollar rate was -0.60% lower 1.6807.