The day before the provincial election was called, the Alberta government announced another easing of restrictions on oil production, saying the amount that can be produced will increase in May by 25,000 barrels per day and another 25,000 barrels per day in June. Effective June 1, the province will allow 3.71 million barrels per day to be produced.
The Alberta government initially ordered production of raw crude oil and bitumen to be cut by 325,000 barrels per day. Since then, the province has eased the mandatory cuts as the discount for Western Canadian Select bitumen-blend oil compared with New York-traded West Texas Intermediate has fallen.
The province mandated production cuts at the start of this year in an effort to reduce a price discount on oil produced in Western Canada, which is due to a lack of pipeline and rail capacity.
The province says in a news release that less diluent is needed to move the bitumen through pipelines when the weather is warmer, meaning there’s more capacity. The province said its crude-by-rail program is scheduled to begin initial shipments in July, ramping up to 120,000 barrel-a-day shipments by 2020. The press release also said the government will continue to monitor the market and its response to the increases and will work to provide information prior to trading periods for future months.
In a press release, Premier Rachel Notley states, “This temporary policy has been critical to reducing the oil price differential while we move ahead with our medium-term plan to ship more oil by rail and lead the long-term charge for new pipelines as we fight to get full value for the resources owned by all Albertans.”
When the production limits were announced in December, the government said it would buy as many as 80 locomotives and 7,000 rail tankers, expected to move the province’s excess oil to markets, with the first shipments expected in late 2019.