Moe will not cut oil production despite pleas from Alberta's opposition leader

Premier Rachel Notley in a Postmedia file

The oil-rich Canadian province announced a plan Sunday to force producers reduce output by 8.7%, or 325,000 barrels per day (bpd), effective January 1, 2019, until the excess crude in storage is drawn down. Global prices crashed last month by the most in more than a decade, a plunge that battered producers in Alberta in particular amid surging oil-sands output, a shortage of pipeline space and heavy USA refinery maintenance.

The cuts will affect about 25 larger bitumen and conventional producers in Alberta.

"We must act immediately".

There will be a 10,000-barrel-per-day exemption to ensure small producers are not hurt disproportionately.

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.

The U.S.is the only country now purchasing Alberta oil.

The action is created to prevent job cuts by letting companies keep people on because they can "see a light at the end of the tunnel", Notley said at a news conference.

"With oil prices lower and production cuts on the horizon, it's less of a reason for the Bank of Canada to come out very hawkish later this week", Mendes said by phone Monday. She was steely-eyed and - dare I say it - at some moments evocative of Margaret Thatcher on the eve of that war at the south end of our then-still-chilly planet.

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The first 10,000 bpd for each producer will be excluded from the mandatory cuts, meant to avoid negatively impacting small producers.

The statement goes on to say this is an extreme case in need of curtailment.

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.

Notley has already taken some steps to try to help producers ship more oil to market while the industry awaits the construction of more pipelines.

Cenovus Energy proposed a reduction last month and the idea has been supported by opposition politicians in Alberta, including United Conservative Party leader Jason Kenney. "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. That plan entails running two additional trains a day, each pulling 100 to 120 cars. Western Canada Select (WCS) has plunged below $15 per barrel, representing a discount to WTI that has hovered at around $40 per barrel.

Similarly, while oilsands giants like Cenovus Energy Inc. and Canadian Natural Resources Ltd. will likely be happier, it's far from clear whether this will translate into anything that helps the NDP's political circumstances. At present, 97 percent of Canadian oil exports go to the US, which is awash with oil.

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