Canadian oil prices soared Monday after the government of Alberta, which sits on the world’s third-largest oil reserve, announced an 8.7 percent cut in production to bolster slumping rates.
Western Canadian Select oil produced in the landlocked province rose 9.58 percent in morning trading to $16.93 at 1800 GMT, but still remained heavily discounted compared to the benchmark West Texas Intermediate (WTI), at more than $50.
The move impacted oil companies active in the province differently, with producers such as Cenovus (+9.89 percent) and Canadian National Resources (+8.59 percent) seeing their share prices rise, while those of companies that also refine petroleum, including Suncor (-0.53 percent), Husky Energy (+0.49 percent) and Imperial Oil (-3.39 percent), were mostly flat.
Alberta Premier Rachel Notley announced late Sunday the 325,000 barrels a day cut in production starting in January.
‘We believe markets are the best way to set prices. But when markets aren’t working, when companies are forced to sell our resources for pennies on the dollar, then we have a responsibility to act,’ she told a press conference.
Notley blamed a shortage of pipeline capacity for creating a huge glut of oil stuck in local storage tanks. Fierce legal and regulatory battles have gummed up projects to get additional output to US Gulf coast refineries or to the Pacific tidewater for shipping overseas.
The premier proposed last week to buy possibly thousands of tanker cars to move oil by rail as a stopgap.
Canada currently produces about 4.8 million barrels of oil equivalent per day, mostly heavy oil from the Alberta oil sands.