Oil patch producers have struggled to ship product of late, a situation that helped drive Canadian crude to moribund prices, with WCS hitting a record low of less than US$14 a barrel in November.
In mid-day trading, Suncor was down 1.5 per cent while fellow Calgary-based companies that both produce and refine oil, Imperial Oil Ltd. and Husky Energy Inc., were off 4.1 per cent and 0.8 per cent, respectively.
Because of that, Alberta, which is the heart of Canada's oil sands region, ordered producers to cut output by 325,000 BPD until oil storage levels there start falling, which represents 8.7% of the country's current production rate. We may see that they're successful in decreasing the differential more significantly as we adjust to what the impact actually is.
"Suncor believes the market is the most effective means to balance supply and demand and normalize differentials".
At the end of trading on Monday, Cenovus Energy Inc. shares were trading at $10.99, nearly 12 per cent higher than their Friday close, while Canadian Natural Resources Ltd. closed at $36.58, up 9.55 per cent.
The top 20 producers account for the vast majority of Saskatchewan's oil production, totalling 441,717 bbls/d in aggregate.
"What we now have is a serious glut in oil, which can't be resolved until OPEC gets together on Thursday and decides to cut back along with Russian Federation and a few other producing nations".
The Pound-to-Canadian-Dollar rate was -0.60% lower 1.6807. "We are recognizing that there are going to be some unpredictable consequences and they are going to try and monitor it closely". Alberta said it will monitor the market closely and reductions will be adjusted accordingly as storage is drawn down or new transport capacity comes online.
"Between now and next winter the Western Canadian oil market is at the mercy of rail schedulers and their attempts to mobilize more locomotives, tank cars, and trained crews-an effort that has thus far proved insufficient to clear the market".
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.
"Pipelines only solve one component of this", Traya said. "The poor finish to Q3 GDP had already put our call for a January rate hike by the Bank of Canada at risk, so we'll need to see some healthy readings for other sectors in the next few weeks to leave that view intact".
In written comments Monday, energy minister Amerjeet Sohi said that Ottawa shares in "Alberta's frustration at the ongoing and unacceptable discount" on Canadian crude. "The good news is there is light at the end of the proverbial pipeline", analysts at Scotiabank wrote in a note on November 21, referring to Enbridge's Line 3 replacement, which would provide an outlet for 370,000 bpd.
Canada's announcement to enforce mandatory production cuts starting next month will make moving crude on trains less attractive just as the government buys railcars.
The glut in reserves driving down prices needs to be addressed before producers begin taking more drastic steps such as slashing capital projects or laying off workers, Notley said.