Alberta Eases Oil Output Curtailment as Prices Rise, Glut Wanes
(Bloomberg) -- Alberta increased the amount of crude its letting producers pump for a second time after local oil prices surged and inventories continued to decline.
The output cap was raised by 25,000 barrels to 3.66 million barrels a day for April, the province said Thursday in a statement. Inventories have “trended downward from January” and the difference in price between heavy Western Canadian Select crude and West Texas Intermediate futures “remains narrow,” the government said.
The move represents another step toward unwinding Alberta’s unprecedented intervention in its oil market, which was meant to save producers and government revenues from a plunge in crude prices brought on by a lack of pipeline space. The curtailment has achieved its goal of boosting Canadian heavy crude prices, and some drillers have even criticized it for overshooting its mark and increasing prices so much that shipping oil by rail became uneconomical.
The government has responded that it will try to manage prices back into a sweet spot that’s high enough to be profitable for producers and low enough to allow rail shipping.
WCS crude’s discount to WTI widened 35 cents earlier Thursday to $12 a barrel, data compiled by Bloomberg show. The curtailments have helped shrink the discount from as wide as $50 a barrel in October.
Western Canadian inventories fell 400,000 barrels in the three weeks ended Feb. 22 compared with a 6 million-barrel decline in the previous three weeks, according to Genscape Inc., a data-provider which tracks stockpiles.
Alberta’s government also sited the need for less diluent in oil pipelines as the weather warms in the spring as a reason to relax the curtailment.
Since January, the cap on production has increased by 100,000 barrels a day.
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