After the Government of Alberta’s announced they will be cutting oil production in the new year, Premier Scott Moe says he understands the decision, yet reassures Saskatchewan residents, our oil production and market are not the same as our neighbours.

Sunday evening, Alberta Premier Rachel Notley, announced that they will be cutting oil production by 8.7 per cent in an effort to lessen the price gap that has Alberta oil selling far below the rest. Notley stated that this was a temporary solution and the barrels per day will likely lessen as the year progresses. The initial 8.7 per cent cut will account for 325,000 barrels of oil per day and Notley stated that this number will likely decrease as Alberta starts to make a dent in their 35 million barrels of oil, currently sitting in storage.

Previous to Sunday’s announcement, the Canadian Association of Oilwell Drilling Contractors (CAODC) released their 2019 Drilling Forecast that already indicated a rig fleet downturn despite a marginal increase in wells drilled and operating days, undoubtedly raising concerns. In the forecast, the CAODC showed an increase of 51 wells and 507 operating days, while showing a 58 drilling rig decrease.

Although Alberta’s energy sector will adjust for the temporary curtail accordingly, what impact will this decision have on Saskatchewan workers and residents?

In a statement released yesterday afternoon, Premier Scott Moe said the price differential for Western Canada Select oil has gone on for too long and laid pointed to the failure of the federal government to build pipelines, ensuring market access and diversity.

“While Saskatchewan understands the action taken by our neighbours in Alberta to reduce the oil glut that is depressing the Western Canada Select oil price, the impact of the differential and how it is spread across our energy sector represents a different challenge to our province,” said Premier Moe as he continued to explain, “roughly 60 per cent of the oil produced in Saskatchewan is a range of light and medium oil. For these reasons, a government-mandated production cut in Saskatchewan could result in a loss of jobs and economic activity in our province, but would have little impact on the price of oil because it would disproportionately impact conventional oil production, which is not the problem.”

Moe said this crisis has cost Western Canada’s energy industry billions in lost growth and Saskatchewan will continue to work with out provincial counterpart, advocating for the long-term solution to the crisis, pipelines.

Sunday nights announcement by Notley was followed up by the markets showing increases for both Canadian Crude Index and Western Canadian Select. The Canadian Crude Index saw a significant jump, upwards of 36 per cent, while Western Canadian Select shot up just under 10 per cent just shy of $17 per barrel. Although increases are welcomed by many, there is still a ways to go with West Texas Intermediate hovering at approximately $53 per barrel.

The oil cuts in Alberta are set to start in January 2019.


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