Canadian oil producers have plans to start ramping up production after the Alberta government said it would remove oil production limits at the end of the year.
"We're going to see a significant amount of that come back over the next few months," Alex Pourbaix, Cenovus CEO, told Reuters in an interview.
The removal of the curtailment measures was welcomed by an embattled industry that had not yet recovered from the last crisis before this one hit. Yet now heavy oil demand is rising while supply remains tight because of U.S. sanctions on Venezuela and Iran. This will benefit Canadian producers who have been booking major losses so far this year.
The mandated production limits were set in place by the previous government of Alberta after takeaway capacity constraints in late 2018 led to plummeting prices of Canada's oil. At one point, Western Canadian Select was trading at $14 per barrel, at a discount of some $50 to West Texas Intermediate.
Since then, prices have recovered, in part thanks to the curtailment, which cut 325,000 bpd from total production in Canada's oil province beginning in January last year. This year, oil companies were forced to cut a lot deeper to weather the price collapse: in the spring, according to Reuters, they reduced their combined output by some 972,000 bpd. To date, most of this has been recovered, with production about 270,000 bpd below pre-crisis levels.
"The indication is that the government does not plan to resume production limits and this is a very positive signal for us and we're really looking forward to this being a fully unencumbered market," said the chief executive of Suncor, Mark Little, as quoted by Global News.
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. More
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