While just a few hundred miles south, WTI is flirting with the one year low price of $50/barrel, Canada’s oil-producing hub, Alberta, would be ecstatic to have its oil trade at anything even remotely close to this level.

As we reported recently, Canadian oil producers are in an increasingly tough predicament. With high and increasing oil demand around the globe over the last year, Canadian oil production has increased accordingly. All of this is simple and predictable economics, but in the process Canadian oil hit a massive roadblock. Producers have the supply, and they have more than enough demand, but they don’t have the means to make the connection. Canadian export pipelines simply don’t have the capacity to keep up with either the supply or the demand.

Canadian oil producers have now maxed out their storage capacity, and the Canadian glut continues to grow while they wait for a solution to the pipeline problem to materialize. As pipeline space is at a premium and storage has hit maximum capacity, oil prices have fallen dramatically, and the differentials that had previously been hitting heavy oil hard in Canada (now at below $14 a barrel for the first time since 2016) have now spread to light oil and upgraded synthetic oil sands crude as well, leaving overall Canadian oil prices at record lows.

So in a long-awaited and according to local energy traders, overdue response, Canada’s largest oil producing province ordered what Bloomberg called “an unprecedented output cut”, an effort to ease a worsening crisis in the nation’s energy industry and adding to global actions to combat a recent price crash ahead of this week’s OPEC+ summit where oil exporters will similarly seek to slash output (something which all OPEC+ nations agree upon, but nobody wants to be the first to cut its own production).

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