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OTTAWA • Alberta’s mandatory cut in oil production is likely to succeed in driving up Canadian crude prices in coming months, but the “heavy-handed” intervention will not alleviate longerterm issues facing the oilpatch, analysts said.

On Sunday Alberta Premier Rachsel Notley introduced a production cut of roughly 325,000 barrels per day, or just under nine per cent of the Alberta market, as a way to curb the recordhigh oil price discount faced by Canadian producers. The curbs will begin January 2019.

The Alberta government hopes to roughly cut in half the 35 million barrels of oil currently sitting in storage across the province — a reduction that analysts said could be achieved in a matter of months.

“You get there by next spring, which is very quick,” said Michael Tran, analyst at RBC Capital Markets in New York.

“While 325,000 barrels per day is not going to meaningfully impact the global oil balance, it’s extremely influential for really kickstarting Canadian oil prices,” Tran said, adding that the cuts were a “heavyhanded mechanism” to raise prices.

Western Canadian Select, the heavy oil benchmark in Canada, soared nearly 37 per cent on Notley’s announcement, up to US$29.95 per barrel, according to Bloomberg data, with the blend trading in the low US$20 range below the U.S. crude, compared to US$32 before the announcement.

Rory Johnston, analyst at Scotiabank in Toronto, said the cuts could narrow the discount for WCS to about US$20 in the first quarter of 2019, from an earlier estimate of US$29.

The decision by Notley to curb oil supplies marks the most substantial market intervention in decades, and comes after discounts for Canadian heavy oil breached US$50 in recent months, the highest on record.

Alberta’s pipeline woes have spurred governments to seek out ways to help get their oil to market. Notley also recently announced the province would buy 120,000 barrels per day of rail capacity to move more barrels to refineries. In August, Ottawa bought the Albertato-british Columbia Trans Mountain pipeline from Kinder Morgan Inc., although a court ruling has halted construction on the project.

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.

“We believe the market is working and view government-ordered curtailment or other interventions as possibly having serious negative investment, economic and trade consequences,” Husky said in a statement.

Suncor said that price differentials were already narrowing.

“Suncor believes the market is the most effective means to balance supply and demand and normalize differentials,” it said.

However, other major producers such as Cenovus Energy Inc. and Canadian Natural Resources Ltd. were vocal in their support.

“At $35 or $45 differentials — the lion’s share of companies in this industry are barely breaking even or actually losing money,” Cenovus chief executive Alex Pourbaix said.

“When you are just breaking even or you are actually losing money, you can do nothing other than the bare minimum ... It’s pure survival mode.”

Alberta’s intervention also comes just after a sharp nose- dive in global oil prices last month, prompting the Organization of Petroleum Exporting Countries to consider cutting as much as 1.3 million barrels per day of production, according to news reports. The group is set to meet in Vienna this week.

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

“It should always be kept in mind that oil is a global industry, and moves in the benchmark WTI price can outweigh changes in the spread, leaving Canadian producers in the lurch,” said Brian Depratto, a senior economist at TD Bank Group.

Depratto expects the production cuts to reduce Canadian real GDP growth by between 0.1 per cent and 0.2 per cent in 2019. In Alberta, the impact could be much higher, between 0.6 per cent and 1.3 per cent over the same period.

Jackie Forrest, senior director at the ARC Energy Research Institute in Calgary, said some companies should have invested in rail capacity sooner to help ease pipeline shortages. Still, she said many pipeline delays were hard to predict amid assurances by industry and government that pipelines could be successfully built to tidewater.

“Industry as a whole should have a lot more rail capacity than we do right now, and we should have thought about it years in advance,” she said.

Alberta’s decision will “clear the supply glut a lot faster than it would have without intervention,” Forrest said.

The production curbs will provide some cushion for producers, but will not completely 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. Canadian producers have for years accepted lower prices for their crude, particularly recently, as demand for highsulphur, heavy crudes continues to weaken.

“Pipelines only solve one component of this,” Traya said.