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Alberta has cut oil production by 1 million bpd so far, the province’s Energy Minister, Sonya Savage, has told OPEC, according to Reuters.
“The Minister stated there is currently no point in announcing additional output adjustments, as production has come down on its own,” OPEC said, noting that “Additionally, the province already had mandated adjustments in place prior to COVID-19 due to a lack of pipeline capacity and inability to move the oil out of the producing region.”
Indeed, Alberta has been a step ahead of other producers when it came to cutting production, although not by design. Pipeline constraints had already forced Canadian crude prices low enough for many producers to struggle to survive, and the fallout of the oil price war and the coronavirus pandemic only sped up the inevitable: forced production cuts on top of government-instituted ones.
Alberta’s oil sector was one of the first and hardest hit by the crisis, with doubts emerging at one point about whether the oil sands industry would even survive this crisis. The industry itself is pessimistic. A recent Business Outlook Survey from the Bank of Canada found that the industry was more pessimistic about its outlook than it was in either 2008, during the Great Recession, or even 2014 when oil price last fell in the $20s and below.
Now, however, as prices begin to improve, some Canadian producers are starting to reverse production cuts, according to the Canadian Press. The production restart is tentative, however, and companies are ready to reverse it again if prices move in an unfavourable direction. For now, this seems unlikely, according to some analysts.
“As long as nobody cheats on their [production] cuts and we continue to see states opening up, provinces in Canada opening up, other jurisdictions around the world opening up, it’s more tailwind to the price,” Phil Skolnick from Eight Capital told the Canadian Press.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.