|
Alberta feels chokehold with storage at limit, more crude cuts
Gary Park for Petroleum News
Jason Kenney is having to rearrange his world - like everyone else - only a year after a landslide victory propelled him into the Alberta premier’s office and only weeks after boldly forecasting that his oil-dependent province might be close to turning the corner.
The only problem was his inability to foresee that the turn was into a dead-end street.
Now his greatest challenge is to contain COVID-19 which Alberta’s latest modeling has estimated could see up to 800,000 of 4.4 million Albertans infected with the virus and between 400 and 3,100 dying from the disease by the end of summer - both estimates that many think have been overstated.
Add to that the latest unemployment numbers showing a loss of 117,000 jobs (mostly in the service sector after tens of thousands in the oil patch had already been laid off), combined with the collapse of oil prices and the failure of Prime Minister Justin Trudeau’s Canadian government to deliver on Finance Minister Bill Morneau’s March 25 promise that an aid package would be coming in “hours, potentially days.”
Jobless rate could hit 25% Faced with such a bleak employment outlook, which Kenney said could see the jobless rate soar from 8.2% to 25%, Kenney seized the controls on April 10 by adding C$1 billion to a budget he has warned could end in a C$20 billion deficit to create work for thousands to repair roads, schools, bridges and potholes.
“We cannot afford to lose a day when we need this money spent in the economy now,” he said, adding the extra cash means a total of C$13 billion has been directed to help Albertans during the pandemic, either through direct subsidies or deferrals on taxes and other payments.
Although Alberta is still rated as the wealthiest of Canada’s 10 provinces with access to even more financial aid, Kenney noted “our economy is still in contraction so it doesn’t make sense to blow all of our fiscal power ... right now.”
Impact of cutbacks He gives no indication of gambling on an end to the torrent of negative economic news stemming from whatever good might emerge from the deal reached by OPEC and its allies on April 12 to cut 9.7 million barrels per day from their production, followed by a gradual scaling back until April 2022.
A majority of international observers were quick to express doubt that, given their past record, the OPEC+ group will even achieve a cutback that amounts to very little given the collapse of global demand.
Raymond James analyst Jeremy McCrea said the market’s best hope of a modest price recovery now rests with the Group of 20 developed nations.
“What you need to see is a G20 cooperative action plan that is not just words, but action,” he said.
No Canadian cuts promised However, Canada’s Natural Resources Minister Seamus O’Regan said Canada promised no production cuts during a G20 virtual meeting on April 10, telling reporters that the G20 call was “about finding the mechanisms to achieve price stability.”
Alberta Energy Minister Sonya Savage said her government will make no move to further curtail production which is already 400,000 bpd below the 3.18 million bpd allowed under mandated limits set at the start of 2019.
She said that by May Alberta is likely to see another 1 million bpd shut in as Canada’s storage facilities reach their projected limit of 40 million barrels (compared with the U.S. Strategic Petroleum Reserve limits of almost 800 million barrels).
With North American storage nearing capacity and refineries already shrinking their crude intakes, Savage noted “it will take a while to clear the glut,” though she clings to hope that the OPEC+ deal will go a “long way” towards reaching a point of production-and-demand balance.
She also hopes the pact will end the month-long price war between Saudi Arabia and Russia, which prompted Kenney to accuse OPEC of engaging in “predatory dumping” of their crude in North America.
But Kenney has reason to question whether Canadian Prime Minister Justin Trudeau is on his side in attacking Saudi Arabia.
Earlier in April the Trudeau administration lifted a moratorium on approving new permits for military exports to Saudi Arabia after renegotiating some terms of a controversial C$14 billion deal to sell light-armored vehicles to Riyadh which critics said could easily be used to suppress human rights.
- GARY PARK
| 