By Robert Tuttle
The announcement came as oil-sands companies were curtailing production in response to pandemic-related demand losses.
Heavy oil production from Imperial Oil Ltd.’s Kearl mine will be reduced to about 150,000 barrels a day in the second quarter versus a capacity of 220,000 barrels a day after the company advanced maintenance to May and June. Other oil sands production cuts include:
- ConocoPhillips cut output on its 150,000 barrel a day Surmont oil sands wells by about 100,000 barrels a day
- Suncor Energy Inc. is operating just one of two production units at its Fort Hills oil sands mine
- Athabasca Oil Corp., which shut entirely its Hangingstone oil sands wells, said last week it would reduce production from its Leismer oil sands site to about 8,000 barrels a day from its 20,000 barrel a day capacity
- Cenovus Energy Inc. cut Christina Lake oil sands output by 60,000 barrels a day
Facing bigger discounts for their crude and higher costs compared to oil producers nearer the U.S. Gulf Coast, Alberta’s oil sands companies were quick to curtail output in response to the collapse in demand for motor and jet fuel as people sheltered at home amid the pandemic.
The fast response kept inventories at about 32 million to 33 million barrels, Keith Chiasson, Cenovus Energy Inc. executive vice president for downstream, said on a call last Wednesday.
Western Canadian Select’s June discount in Alberta to U.S. benchmark futures shrank to $3.80 a barrel, according to NE2 Group. The gap hasn’t been that narrow since at least 2008, compared to data compiled by Bloomberg extending back that far.
WCS at Cushing was at a 75-cent discount to futures, according to NE2 Group, putting the difference between Alberta and the U.S. supply hub far below the cost of transport.