Alberta’s oil cuts aim to boost crude prices, stocks,
Plan would lower production by 325,000 barrels a day amid nation’s energy crisis
Alberta’s announcement that it will cut oil production next year to bolster prices sent crude soaring and boosted shares of Canadian producers.
The unprecedented move by the country’s largest oil-producing province is aimed at easing the crisis in the nation’s energy industry. The plan announced on Sunday will lower production of raw crude and bitumen from Alberta by 325,000 barrels a day, or 8.7 per cent, from January until excess oil in storage is drawn down. The reduction would then drop to 95,000 barrels a day until the end of next year at the latest.
The discount of Western Canadian Se- lect crude to U.S. benchmark West Texas Intermediate oil narrowed on Monday morning to the tightest it’s been since July, data compiled by Bloomberg showed.
Shares of oil producers operating in Alberta also surged, while there were declines for refining companies who had benefited from supplies of cheap crude.
The planned cuts by the world’s fifthbiggest producer follows a renewed commitment over the weekend by Saudi Arabia and Russia to extend their deal to manage the oil market. Global prices crashed last month by the most in more
OIL CUTS continued on B5
than a decade, a plunge that battered producers in Alberta in particular amid surging oilsands output, a shortage of pipeline space and heavy U.S. refinery maintenance.
The production cuts will weigh on Canada’s economy next year, according to some of the country’s biggest lenders.
Bank of Montreal economists Benjamin Reitzes and Robert Kavcic predicted in a research note Monday that gross domestic product could expand by 1.8 per cent next year, instead of the 2 per cent forecast previously, if there are extended shutdowns in the oil sector.
Canadian Imperial Bank of Commerce economist Royce Mendes also said the growth rate could be pared by 0.1 percentage points in 2019, adding he may change his prediction for a Bank of Canada interestrate increase for January.
Alberta Premier Rachel Notley is following the advice of producers like Cenovus Energy Inc. and Canadian Natural Resources Ltd., which have been hammered by record low prices for heavy Canadian crude, which at one point were $50 (U.S.) a barrel less than U.S. grades. The crisis has caused some producers to reduce production on their own, slash dividends and delay next year’s drilling plans.
“Every Albertan owns the energy resources in the ground, and we have a duty to defend those resources,” Notley said in a statement. “But right now, they’re being sold for pennies on the dollar. We must act immediately, and we must do it together.” The amount being cut is more than the total production of each of OPEC’s three smallest members: Equatorial Guinea, Gabon and the Republic of Congo.
The curtailment plan, which will apply to both oilsands and producers, should narrow the discount between Western Canada Select and U.S. benchmark oil by at least $4 a barrel and add about $1.1 billion (Canadian) in government revenue in the fiscal year starting April 2019, according to the statement.