Crude oil inventories in Canada’s oil province Alberta rose in February despite a government-imposed production cut aimed at propping up the price of Canadian crude and reducing excess supply in storage.
Reuters quoted data from the Alberta Energy Regulator that revealed the province exported less crude by rail during that month, which caused the buildup in inventories. At the end of February, there were 72 million barrels of crude in storage, up by 3.9 million barrels a month earlier. For the first two months of the year, total stockpiles of oil fell by 2.3 million barrels.
Alberta’s government instituted an obligatory production cut of 325,000 bpd amid a pipeline shortage that pushed Canadian crude prices to historic lows against West Texas Intermediate. Prices reacted immediately, before the cuts even went into effect, with some observers even cautioning that this could reduce refiners’ appetite for Alberta’s oil.
Since January, when the cuts entered into effect, Alberta’s government has revised down the cuts twice as prices trend higher than the optimum level to keep refiners buying Canadian crude.
The first revision came at the end of January, when Alberta Premier Rachel Notley said that producers could reverse the cuts, boosting their production by a combined 75,000 bpd in February and March.
At the start of March, Notley announced another revision of the cuts, by 25,000 bpd, beginning this month. This brought the total revision to 100,000 bpd for the first four months of the year. This means an average of 3.66 million bpd for April.
“A short-term production limit is not ideal or sustainable, which is exactly why we have a plan to move more oil by rail in the coming months while we fight for the long-term solution of building pipelines to new markets,” Notley said at the time.
“The balancing act for the government is a very steep task because they have to manage all these variables,” a Genscape oil analyst told Reuters this month. “The government did not expect rail would drop off as steeply as it did and that’s had a dampening effect (on inventory draws).”
By Irina Slav for Oilprice.com
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