Cenovus credits quota easing as it ramps up crude-by-rail output to 100,000 bpd

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CALGARY — An executive with Cenovus Energy Inc. says it produced more crude in December thanks to the Alberta government’s decision last fall to allow producers to exceed provincial quotas if they move the additional barrels by rail.

Executive vice-president Drew Zieglgansberger says the oilsands company met its goal of ramping up its crude-by-rail shipments to 100,000 barrels per day by the end of last month, an accomplishment that he said bodes well for its oilsands expansion plans this year.

The comments at a business conference in Banff follow a report from Canadian National Railway Co. on Tuesday that it moved 20 per cent more crude carloads in 2019 and it expects oil to be a “growth driver” again this year.

In a report on Wednesday, analyst Phil Skolnick of Eight Capital says several Canadian oilsands companies bumped up production in December thanks to the rail allowance, a 10,000 bpd reduction in overall provincial oil production limits and the recovery of the Keystone export pipeline after an outage in the United States.

He says Alberta oil storage inventories rose, which caused a widening of the discount paid for Alberta crude in comparison with U.S. benchmark oil prices.

However, he says inventory levels have started to fall again due to small capacity expansions on existing pipelines and higher crude-by-rail shipments, adding that when combined with planned second-quarter oilsands maintenance shutdowns, price discounts are expected to narrow over the coming quarter.

AltaCorp Capital said in a report Wednesday that Western Canadian Select bitumen-blend oil has been selling for 60 per cent of New York-traded West Texas Intermediate during January, compared with its five-year average of 68 per cent, and Edmonton Par light oil is fetching 85 per cent of WTI, down from its traditional 90 per cent.

Canadian oil normally sells for less due to transportation costs and quality differences.

Last week, the Canada Energy Regulator reported crude-by-rail exports increased to 297,500 bpd in November, up by about 10 per cent from October but well behind the record level of 353,800 bpd in December 2018.

This report by The Canadian Press was first published Jan. 29, 2020.

Companies in this story: (TSX:CVE, TSX:CNR)

The Canadian Press