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State Of Emergency: Vital Oil Pipeline Shuttered By Snow Storms

Snow Storm

TC Energy, formerly known as TransCanada, has declared force majeure on the Keystone oil pipeline after a snow storm in Manitoba disrupted operations, Reuters reports, citing a confirmation from the pipeline operator.

“Due to the recent storm in Manitoba over the weekend, we did declare force majeure as the province declared a state of emergency. We are currently operating at reduced flows,” a spokesperson for TC Energy told Reuters in a statement.

The Keystone pipeline has a capacity to carry 590,000 bpd of Canadian crude to the United States refineries. While it is unclear exactly how much TC Energy had reduced the flow of oil through the pipeline, but Western Canadian Select was down on the news, extending a losing streak.

The Keystone pipeline is one of the few vital outlets for Canadian crude and any disruption in its operation is bound to affect prices sharply due to the lack of alternative outlets.

What’s more, Canadian oil prices already came under new pressure last month, when the Alberta government announced it would relax production cuts imposed last December, allowing local oil companies to produce 3.8 million barrels of crude daily in November.

The cuts were imposed by the previous Alberta government in an attempt to arrest a catastrophic collapse in prices because of the growing imbalance between production and export capacity. The cuts did what they were supposed to do and prices rebound quickly. Since then, these have been lowered a few times despite the problems around pipelines persisting.

Even so, Albertan drillers got some good news in September. First, the federal government said work was about to resume on the Trans Mountain pipeline—the infrastructure that many producers are pinning their hopes for the future on—and it should be operational by 2022, at a daily capacity equal to that of the Keystone pipeline.

More good news came from across the border, where a Nebraska court finally approved the alternative route for the Keystone XL pipeline—a project even more controversial than Trans Mountain.

By Irina Slav for Oilprice.com

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