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

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

Alberta Premier Rachel Notley Orders Oil Production Slashed To Fight Price Crisis

He noted that southeast Saskatchewan oil, in particular the Bakken, is not affected by the same price differentials as in Alberta.

"Ultimately this is a problem and a challenge that is not going to be solved until we have access to our export markets, until we have proper pipeline capacity here in the nation and until we have a federal government that is not putting headwinds in front of an industry that is important to all Canadians", he said.

Dave is joined by Calgary Herald business columnist Chris Varcoe.

Western Canada Select crude's discount to USA benchmark West Texas Intermediate oil narrowed on Monday to the tightest since July.

The planned cuts by the world's fifth-biggest producer follows a renewed commitment over the weekend by Saudi Arabia and Russian Federation to extend their deal to manage the oil market. The cuts will be spread among companies producing at least 10,000 bpd, based on average production.

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Notley expects the production cuts to boost prices for WCS by roughly $4 per barrel, adding $1.1 billion to government revenue between 2019 and 2020. The government said the reduction will be evaluated monthly.

Saskatchewan Premier Scott Moe said in a statement that the province isn't considering following Alberta's example. That's on top of mounting concern that the country's regulatory framework makes it very hard to get much-needed pipeline projects approved.

The move is not unprecedented - in 1980, Tory premier Peter Lougheed forced oil production cuts to protest the federal Liberals' national energy program.

Canada's main stock index began the week higher as Alberta production cuts helped to lift oil prices to their largest gain since June, while investors felt relief from a preliminary trade truce between the US and China. Cuts will initially reduce the oversupply by 325,000 bpd, but eventually that number will drop to 95,000 bpd after excess storage is dealt with.

A weekend 90-day ceasefire between the US and China on imposing higher tariffs was a catalyst for global markets to rise even though a final resolution is far from certain, Fehr said in an interview. "For the long haul, pipelines remain the preferred and environmentally safer mode of exporting our energy resources out to Asian and US markets".

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"With so much oil just sitting there, unable to be moved, it is being sold at fire-sale prices, around $10 a barrel", she wrote.

Analysts said that means the market is already halfway to the provincial goal, estimating that between 130,000 and 160,000 bpd has already been shut in, mainly by Cenovus and Canadian Natural. Small producer Whitecap Resources Inc. now doesn't plan to cut any jobs as a result of the Alberta plan, Chief Executive Officer Grant Fagerheim said in an interview. WCS's discount to futures fell to $50 a barrel in October amid refinery maintenance in the U.S. Midwest. Rachel Notley hopes slowing down supply will help raise the lagging Western Canadian Select Price.

Carlo Dade, an expert on Canada-U.S. trade at the Canada West Foundation, doesn't think Alberta's curtailment violates the North American Free Trade Agreement, which is still in effect.

On Wednesday, Notley announced Alberta would increase crude-by-rail capacity by an additional 120,000 bdp, starting in late 2019.

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