Monitoring the oil market

Monitoring the oil market

The Alberta government has eased regulation on production cuts in an effort to reduce a price discount on oil produced in Western Canada.

The Alberta government has announced another easing of restrictions on oil production, saying the amount that can be produced will increase in May by 25,000 barrels per day and by another 25,000 barrels per day in June.

The province mandated production cuts at the start of this year in an effort to reduce a price discount on oil produced in Western Canada, which is due to a lack of pipeline and rail capacity.

The province said in a news release that less diluent is needed to move the bitumen through pipelines when the weather is warmer, meaning there’s more capacity.

The Alberta government initially ordered production of raw crude oil and bitumen to be cut by 325,000 barrels per day.

Since then, the province has eased the mandatory cuts as the discount for Western Canadian Select bitumen-blend oil compared with New York-traded West Texas Intermediate has fallen.

It said that when both increases are in effect in June, it will represent a total increase of 150,000 barrels a day since the start of the production limit policy on Jan. 1.

“As we increase production, we’re providing even more certainty for producers who have been working with us to protect the jobs and livelihoods of thousands of Alberta families and businesses,” Premier Rachel Notley said in Monday’s news release.

“This temporary policy has been critical to reducing the oil price differential while we move ahead with our medium-term plan to ship more oil by rail and lead the long-term charge for new pipelines as we fight to get full value for the resources owned by all Albertans,” the statement added.

Effective June 1, the province will allow 3.71 million barrels per day to be produced.

When the production limits were announced in December, the government said it would buy as many as 80 locomotives and 7,000 rail tankers, expected to move the province’s excess oil to markets, with the first shipments expected in late 2019.

Monday’s news release said the province’s crude-by-rail program is scheduled to begin initial shipments in July, ramping up to shipments of 120,000 barrel-a-day by 2020.

The government said it will continue to monitor the market and its response to the increases and will work to provide information prior to trading periods in the coming months.

2019-03-20T22:41:40+00:00

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