Alberta’s Oil Production Cut Unknowingly Helping OPEC

Earlier this month, Alberta Premier Rachel Notley ordered to cut oil production in Canada, due to the action oil production was decreased by 8.7 percent, approximately 325,000 barrels per day. Canada was striving to maintain its energy sector, but simultaneously, it had helped OPEC, unknowingly. The oil production cut in Alberta is a result of insufficient pipelines between Canada and the U.S. Most of the Middle East countries have been facing effects of an oil production cut. Immediate after, Alberta production cut announcement, Soon Al Mazrouei, Energy Minister of UAE and the former president of the OPEC was expressing his view about Alberta cuts, where he said that Alberta has saved OPEC grave production cuts. All the oil producer countries are changing its natures and approach to oil production; similarly, the US has changed. When there was zero possibility of oil production cuts, Alberta took an unexpected decision. But, it happened, he added.

Current production cut is initiated to balance oil prices in the varying economy and to secure Alberta oil production from being forcefully banned. Canada was seeking to balance the production throughout the year. Dan Kish, the senior vice president at Institute for Energy Research said crediting aversion form environmentalists that the activities had happened and currently occurring in Canada are due to the stalled oil market. And because of this reason, environmentalists prefer to focus on other projects like Dakota Pipeline. The Alberta raises the cost of pipeline then producers are getting a minimum outcome, consequently, funds left for reinvestment are extremely insufficient for new processing and production facilities, Kish added.

Canada had sold oil at $11 per barrel at a wellhead in late November when the price cut was not announced. The selling price was $50 less than Texas crud’s selling price. The price gap was very significant for the oil market, but it was not new. Tar sands oil price typically flutters at a price which is $10-15 less than Texas oil price. The diverse pricing was exhibiting Canadian oil producer’s potential to sell their oil in markets. The pipeline is an affordable and faster transport system for oil producers. It generally charges $5 to $13 per barrel. If the producer failed to ship the oil through the pipeline, he has to either uplift the oil cost or wait till getting a chance for next shipment. Meanwhile, many producers refer to ship oil barrels by another way such as rail, but it cost $12 to $20 per barrel. Canadians are operating their business in this type of worse conditions.

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Joseph is the co-founder of News Earlier. He is working extensively in gathering business related news.

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