Canada's Crude Oil Production Cuts Are Unsustainable

Zero Hedge | 1/15/2019 | Staff
PaMe (Posted by) Level 3
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In an attempt to combat a ballooning oil glut and dramatically plummeting prices, the premier of Alberta Rachel Notley introduced an unprecedented measure at the beginning of December when she is mandating that oil companies in her province cut production. This directive was particularly surprising in the context of Canada’s free market economy, where oil production is rarely so directly regulated.

Canada’s recent oil glut woes are not due to a lack of demand, but rather a severe lack of pipeline infrastructure. There is plenty of demand, and more than enough supply, but no way to get the oil flowing where it needs to go. Canada’s pipelines are running at maximum capacity, storage facilities are filled to bursting, and the pipeline bottleneck has only continued to worsen. Now, in an effort to alleviate the struggling industry, Alberta’s oil production has been cut 8.7 percent according to the mandate set by the province’s government under Rachel Notley with the objective of cutting out around 325,000 barrels per day from the Canadian market.

Government - Oil - Companies - Production - Caps

Even before the government stepped in, some private oil companies had already self-imposed production caps in order to combat the ever-expanding glut and bottomed-out oil prices. Cenovus Energy, Canadian Natural Resource, Devon Energy, Athabasca Oil, and others announced curtailments that totaled around 140,000 barrels a day and Cenovus Energy, one of Canada’s major producers, even went so far as to plead with the government to impose production caps late last year.

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Caps - October - Oil - Prices

So far, the government-imposed productive caps have been extremely successful. In October Canadian oil prices...
(Excerpt) Read more at: Zero Hedge
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