ALBERTA ORDERS 8.7% OIL PRODUCTION CUT

‘WE MUST ACT IMMEDIATELY,’ NOTLEY SAYS, AS 25 PRODUCERS LIKELY TO FACE RESTRICTIONS

Alberta will cut oil production by 8.7 per cent starting in January in an effort to reduce the punishing price differential plaguing energy producers, says Premier Rachel Notley.

“We must act immediately, and we must do it together,” she said in a statement Sunday.

About 25 producers are expected to face cuts.

The price differential between Western Canadian Select and West Texas Intermediate has fluctuated in recent weeks, peaking at around C$45 a barrel. Western Canadian Select was selling for US$17 per barrel Friday.

Notley hinted Friday in a Postmedia op-ed that the province would intervene in the market.

She laid out two options — letting the free market correct itself, or curtailing production temporarily.

“That restriction would remain in place until stockpiles draw down, the price gap closes and the bleeding stops,” she wrote.

UCP Leader Jason Kenney and Alberta Party Leader Stephen Mandel have both pushed for production cuts.

“While a consensus appears to be forming among some political leaders, no such consensus exists within industry,” Notley wrote. “At this point, no industry consensus is expected.”

Cenovus Energy Inc. CEO Alex Pourbaix called for government-mandated cuts, and said last week that there is a “growing chorus of voices” in that camp.

Producers are making 190,000 raw crude oil and bitumen barrels per day (bpd) more than can be shipped out of Alberta, said a Sunday government news release.

Cuts will initially reduce the oversupply by 325,000 bpd, but eventually that number will drop to 95,000 bpd after excess storage is drawn down, said the province.

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

The province pegs losses due to the oil discount at around $80 million per day, though estimates vary.