Western Canadian Select catapulted to US$32.91 a barrel on Monday morning, up around US$11 from Friday's close, as the market immediately priced in the impact of Alberta Premier Rachel Notley's plan to draw down the province's crude backlog via production cuts.
"Alberta is now producing 190,000 raw crude oil and bitumen barrels per day more than can be shipped by pipelines, rail or other means".
Moe said that while he agrees there is an unacceptably high differential for Alberta oil, "a government-mandated production cut in Saskatchewan could result in a loss of jobs and economic activity in our province, but would have little impact on the price of oil because it would disproportionately impact conventional oil production, which is not the problem".
Notley said it will be a short-term solution created to be monitored and adjusted monthly as necessary.
Shippers and refiners are moving discounted barrels of oil via rail or trucks, but the storage glut sits at more than 35 million barrels in Alberta, just below all-time records set in September, according to data firm Genscape.
Canadian heavy crude strengthened the most since June.
Canada's heavy-oil benchmark surged after Alberta announced its crude production cuts - and prices should see "further improvement" in the coming years, according to a research note.
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Rory Johnston, analyst at Scotiabank in Toronto, said the cuts could narrow the discount for WCS to around US$20 in the first quarter of 2019, down from an earlier estimate of around US$29.
For example, OECD inventories are showing continued buildups, while current expectations are calling for USA shale companies to help boost total production above 12 million barrels a day next year.
- Canadian Dollar rises broadly as oil markets rebound on Monday.
The federal government has not yet decided whether it will contribute anything toward Alberta's purchase of new rail cars so that two more trains a day can transport crude from Alberta to refineries in Canada and the United States.
"We are at an historically crucial point in terms of how tight this infrastructure is", Oberstoetter said.
Oil prices slumped by around 2 percent on Wednesday, pulled down by swelling USA inventories and a plunge in global stock markets as China's government warned of increasing economic headwinds.
Meanwhile, Suncor Energy Inc.(SU.TO) said that it also would have preferred to avoid government intervention. The reduction would drop to 95,000 barrels a day by the end of next year. Alberta is now looking to buy trains to move oil out of the province. This is especially true if companies with their own USA refining capacity, like Husky Energy Inc., Imperial Oil Ltd. and Suncor Energy Inc., decide to squeeze their own workers till the pips squeak to punish the government for reducing their profit expectations for the greater good.
"We don't actually need Ottawa's sympathy".
Rory Johnston, commodity economist at Bank of Nova Scotia, said the WCS surge seemed "more or less right", but that "we're not used to seeing the market price in such a definitive change in supply so quickly".