Put oil 'crisis' on first ministers agenda: Alberta, Saskatchewan premiers

Alberta Premier Rachel Notley arrives at the first ministers' meeting in Montreal on Friday

NY time, data compiled by Bloomberg show. WTI itself climbed as much as 5.7 percent, the biggest intraday gain since June, to $53.85 a barrel.

Notley blamed the oil price gap on the federal government's failure to build pipelines resulting in the province producing 190,000 raw crude oil and bitumen barrels per day that can not be shipped out.

Above: Price of Central Alberta blend of oil.

The Alberta government should look to the example of the US government's strategic petroleum reserve, which holds the equivalent of a year's worth of Alberta's oil production in salt domes in Texas and Louisiana.

The short-term production cuts, permitted under the province's legislation, will take effect on New Year's Day, the premier said.

The initial curtailment of 325,000 barrels per day is expected to drop over the course of 2019, with an estimated average of 95,000 barrels a day once excess storage is cleared.

Official U.S. government oil production and inventory data is due later on Wednesday.

Oil prices slumped by around 2 percent on Wednesday, pulled down by swelling USA inventories and a plunge in global stock markets as China's government warned of increasing economic headwinds. If Saskatchewan followed the Alberta model, and all producers over 10,000 bbls/d were curtailed by 8.7 per cent, the curtailment would total 25,484 bbls/d. Notley said the government has a duty to protect resources as they are owned by every Albertan.

How much production would be affected if Saskatchewan did implement cuts in a similar manner to Alberta? Each company's level of curtailment will be based on six months of its highest level of production over the past 12 months, according to the statement.

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Alberta estimates the province is now over-producing by about 250,000 bpd.

The move is seen as an attempt to shrink the difference between the price on Alberta oil and global benchmarks. "It has a huge impact on small businesses, any of the service companies working for the oil and gas companies, and the companies themselves".

She also made sure the blame was shared between the current federal Liberal government and the past Conservative one - in which provincial opposition leader Jason Kenney was an influential minister.

The Western Canadian province of Alberta this week announced mandated temporary oil production cuts, a rare move aimed at bolstering sagging crude prices caused by rising production that has outstripped pipeline capacity and led to a glut in storage.

"Suncor believes the market is the most effective means to balance supply and demand and normalize differentials". Crescent Point Energy, meanwhile, has less exposure to the regional oil price issues in Canada since it doesn't produce the deeply discounted heavy oil found in Alberta.

The January crude contract gained four per cent or US$2.02 to US$52.95 per barrel.

Stronger per-barrel pricing will help Canadian companies increase capital spending in preparation for 2020, when more export capacity is set to come online.

The day after Notley's announcement, the price of Western Canadian Select heavy oil jumped $8.02 to $29.95 United States a barrel.

Price differential: Canada's heavy crude usually trades at a discount because of refining and transportation costs, so a price gap or differential is typical between WTI and WCS.

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