By Kevin Orland
The widening differentials suggest that Canadian oil is at high risk of a “blowout,” Credit Suisse analyst Manav Gupta said in a report this week. If the differential widens beyond $25 a barrel, the “Alberta government might be forced to step back in and raise the volumes on mandated cuts to control bloating inventory situation,” he said.
Alberta has progressively increased the province’s allowed production since the limits went into effect at the start of last year. The output targets for this month and next are set at 3.81 million barrels a day, only about 75,000 barrels less than before the program was implemented. The rising production has caused increased rationing on Enbridge Inc.’s heavy oil line, and inventories already had built to record highs at the end of November after a rail strike and a temporary outage on TC Energy Corp.’s Keystone pipeline.
Western Canada is seeing some improvements on the pipeline front, with about 100,000 barrels of daily shipping capacity added on Enbridge’s Mainline late last year and an additional 50,000 barrels being added to Keystone early this year, said Kavi Bal, a spokesman for Alberta’s Ministry of Energy.
“We will continue to closely monitor the situation ensuring that Albertans receive the best value for their resources,” Bal said in an email.