Gluts, price differential: Six things to know about Canada's oil-price gap

Gluts, price differential: Six things to know about Canada's oil-price gap

On Monday, the Saskatchewan government announced it would not be following Alberta's plan to cut oil production in an effort to reduce the punishing price differential plaguing energy producers.

Alberta's government on Sunday ordered producers to cut output by 8.7 percent, or 325,000 barrels a day (bpd), starting in January.

Notley says a lack of pipeline capacity is a big part of the problem and she has once again called on Prime Minister Justin Trudeau's government to do more than just send sympathy.

Hapless Alberta takes action as oil prices crash Faced with a crisis moving oil out of the country, the provincial government in Alberta is stepping in to purchase trains in order to ease the midstream bottleneck.

"We are essentially giving our oil away for free". "I can't promise the coming weeks and months will be easy", said Notley in a news release.

Notley said the 8.7 per cent reduction begins in January, with the expectation that figure will gradually decrease until the cuts are scheduled to end on December 31, 2019.

"We are at an historically crucial point in terms of how tight this infrastructure is", Oberstoetter said.

The reduction will drop to an average of 95,000 barrels a day until curtailment ends at the end of 2019, when Enbridge's new Line 3 starts operating.

Only nine producers were over the 10,000-bbl/d production level which Alberta is exempting from production curtailment.

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

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Canada's oil production is at a record 4.6 million barrels a day, but producers can not get oil to market because the pipelines that cross into the United States are full.

The announcement is expected to narrow the differential by at least $4 per barrel and add an estimated $1.1 billion to government revenues in 2019-2020.

Premier Notley told reporters the province would be measuring the effect of the cuts each month to make sure production is not lower than necessary.

The Trans-Mountain line to the B.C. coast is now in legal limbo despite being approved two years ago.

The premier has already said the province will buy as many as 80 locomotives and 7,000 rail tankers - expected to cost hundreds of millions of dollars - to move the province's excess oil to markets, with the first shipments expected in late 2019.

Kenney, leader of Alberta's opposition United Conservative Party, said Saskatchewan should also cut production.

Canada has the world's third-largest oil reserves and is the top source of foreign oil for the U.S. Still, she said many pipeline delays were hard to predict amid assurances by industry and government that pipelines could be successfully built to tidewater. Industry groups and pundits scolded protestors, declaring that the oil would find its way to the market one way or another.

Saskatchewan Premier Scott Moe jointly signed a letter with his Alberta counterpart Rachel Notley on Monday calling for a discussion on "the crisis facing the energy industry" during meetings later this week.

"They dragged their feet".

"We've got challenges with respect to pipelines, we've got challenges with respect to rail and now we've got challenges with respect to our demand market", Allan Fogwill, CEO of the Canadian Energy Research Institute said at a presentation in Calgary Wednesday.

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