Hapless Alberta takes action as oil prices crash

Ivan Schwartz
December 6, 2018

This comes after the Alberta government took the advice of producers who have been hit by discounted prices and announced its plan to slap a production cut of 325,000 bpd (8.7%) to offset a supply glut.

New-York-traded West Texas Intermediate (WTI), delivered at Cushing, Okla., is the benchmark price for light crude oil in North America.

Oil prices were pressured by a weekly report from the American Petroleum Institute (API) that said USA crude inventories rose by 5.4 million barrels in the week to November 30, to 448 million barrels, in a sign that US oil markets are in a growing glut.

Notley said that she expects the cuts to remain in place until the 35 million barrels of oil now sitting in storage because of what she describes as "unsustainable" transportation bottlenecks are shipped to market.

"Investors will definitely worry that this is a slippery slope, and that the government can curtail production or interfere in business to pick winners and losers", Ollenberger said in an interview.

The government of Alberta is taking action to ease a regional glut of oil brought on by the continued delays of much-needed oil pipeline projects.

In the 1970s, the federal government instituted price controls on oil to keep prices low for domestic consumers and created the crown corporation Petro-Canada to ensure Canadian ownership of some of the country's energy industry, which at the time was heavily owned by Americans.

Notley said the 8.7 per cent reduction begins in January, with the expectation that figure will gradually decrease until the cuts are scheduled to end on December 31, 2019.

Second summit needed as North Korea not living up to commitments: Bolton
Despite the warming ties, it remains unclear whether Kim will make his first-ever visit to the South this year, as Seoul is hoping.

Two US Marine planes crash while refueling off Japan
A search and rescue operation is under way in Japan after an incident involving two US Marine Corps aircraft. The aircraft had taken off from Marine Corps Air Station Iwakuni, Japan at around 2am local time.

Facebook collected records of users' text and phone calls, secret documents reveal
Facebook is accused of using this data to assess "not just how many people had downloaded apps, but how often they used them". Fox News has reached out to Airbnb, Lyft and Netflix with requests for comment.

Alberta's price cut is rare but not unprecedented - in 1980, Tory premier Peter Lougheed forced oil production cuts to protest then-prime minister Pierre Trudeau and his Liberal government's national energy program.

Alberta, as a hopelessly oil-dependent petrostate, is flailing about, looking for a solution to the pipeline bottleneck.

Alberta's oil industry is producing roughly 190,000 bpd in excess of available takeaway capacity. They're seeing the differential hurting their prices.

The bounce helps to explain the Canadian dollar strength today.

"We are at an historically crucial point in terms of how tight this infrastructure is", Oberstoetter said.

Canada's federal government had been attempting for some time to build a new pipeline called "Trans Mountain" that it claimed would enable the nation to export more oil to global markets, instead of sending all of it to the U.S. However, the Imperial and Husky companies said Friday that they opposed non-voluntary production cuts but supported the rail investments because that could help improve market access.

More broadly, the slide in USA oil followed a tumble in global stock markets on Tuesday, with investors anxious about the threat of a widespread economic slowdown. That will drop to an average of 95,000 barrels a day at the end of 2019 when Enbridge's new Line 3 pipeline should come into operation. "They're not as big a player as us but they're still a player", McCuaig-Boyd said. That narrower discount is now much more likely given the production cut. "The poor finish to Q3 GDP had already put our call for a January rate hike by the Bank of Canada at risk, so we'll need to see some healthy readings for other sectors in the next few weeks to leave that view intact". The government estimates Alberta is losing $80 million a day due to the discount.

Other reports by GizPress

Discuss This Article

FOLLOW OUR NEWSPAPER