A month into Alberta’s mandatory oil curtailment and rationing on the country’s biggest heavy-crude export pipeline system has eased, but very little.
Apportionment, the percentage by which each shipper’s nominated volume is reduced in order to meet a pipeline’s capacity, will be 39 percent on the heavy oil line 4/67 of Enbridge Inc.’s mainline system out of Kerrobert, Saskatchewan, in February versus 42 percent in January, the company said on Monday. Apportionment on light oil line 2/3, by contrast, increased in February to 46 percent from 43 percent in January.
Alberta’s government mandated that producers must cut output collectively by 325,000 barrels a day in January and the same amount in February. The action was intended to alleviate a glut caused by too much production encountering too few pipelines.
Local oil prices surged after the curtailment announcement, with heavy Western Canadian Select crude’s discount at Hardisty, Alberta, to West Texas Intermediate futures at its hub in Cushing, Oklahoma, shrinking from $50 a barrel in October to less than $7 a barrel earlier this month, the smallest in almost a decade. The discount was so small, it wouldn’t cover the cost of shipping the oil to the U.S. Gulf Coast either by rail or by most pipelines.
To be sure, the 39 percent apportionment on heavy oil line 4/67 is the lowest since January of last year. The mandatory oil curtailments are working and the provincial government is “hopeful” the cuts can be eased by April, Alberta Premier Rachel Notley told reporters on Jan. 15.
Enbridge’s mainline is the largest oil export pipeline system in Canada, carrying crude produced in Alberta’s oil sands as well as conventional and tight oil pumped from Western Canadian fields from Edmonton, Alberta, to Superior, Wisconsin. The lines connect up with other lines that carry the oil as far south as the Texas coast.