Alberta premier announces 8.7 per cent oil production cut to increase prices

Hapless Alberta takes action as oil prices crash

Cenovus Energy Inc. - which led the campaign for government intervention - jumped 10 per cent in early trading to $10.78, while Canadian Natural Resources Ltd., which also supported the production cuts, was up 9.5 per cent to $36.58.

Announcing the measure on Sunday, Premier of Alberta Rachel Notley said that the province is "facing a hard challenge", but the move is aimed to reverse an unprecedented price gap that has seen the province's crude sell for significantly less than the global price.

"But right now, they're being sold for pennies on the dollar". That figure is expected to shrink as the glut of oil in storage is addressed.

The rally seems to have only affected upstream producers.

"We have set out a 10,000 barrel [a day] exemption for all producers. But we think this is a good way to allow for that flexibility that's needed and that exists within the industry to accommodate these changes", she said.

"In the last few weeks, this price gap has reached historic highs", Notley said Sunday in a speech timed to run live on supper-hour newscasts in Alberta.

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He said he commends the premier for following through on a suggestion he had brought forward, adding he doesn't believe government action will result in the loss of jobs.

Alberta produces 3.7 million barrels a day, but that's 190,000 barrels more than can be shipped. The province estimates 25 producers will have to impose cuts.

But he said Notley's government has played a role in creating the problem by not pushing back as the federal government cancelled the Northern Gateway pipeline to B.C. and introduced legislation that industry leaders say will make it more hard to get oil megaprojects approved.

"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".

"These are not ordinary circumstances", reads the statement from the company's president and CEO Alex Pourbaix.

Imperial Oil CEO Rich Kruger said the government intervention could do long-term damage to the market, but that his company would comply with the order. She earlier stressed that now Alberta's resources are given away "for next to nothing", referring to the province's crude selling for around $15 a barrel. "The measures Premier Notley announced [Sunday] will help balance the market in the short term until new rail and pipeline capacity comes on stream late next year and into 2020".

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