EDMONTON -- The world’s largest oil producers have agreed to slash output after a price war sent values tumbling. It's the biggest supply cut ever, but industry officials fear the damage has already been done.
For a month, Russia and Saudi Arabia’s oil taps flowed freely. The price war sent the cost of a barrel of Alberta oil tumbling below the cost of a cup of coffee.
Petroleum market analysts said it could mean a bump in crude oil prices, but it’s too early to tell by how much.
“Until we know that, we really can’t say too much about how that might affect the Alberta and Canadian economy,” said Michael Ervin, petroleum market analyst. “Or for that matter employment.”
But on Monday, prices were still down. Western Canadian Select closed Monday down to 4 dollars and 25 cents.
“While it’s encouraging that there’s an agreement to end the irresponsible global price war, much damage has been done,” said a statement by the Canadian Association of Petroleum Producers, the organization representing Canada’s oil producers. “There is nothing OPEC can do to stop the COVID-19 pandemic.”
The pandemic has grounded planes, shut down large factories, and forced people to stay home.
The global glut in supply, coupled with the drop in demand, has put oil workers like Daniel Hein out of a job.
“There’s just no work. Can’t find work anywhere. It’s just a waiting game right now,” he told CTV News Edmonton.
Ervin points out that an increase in global crude prices may increase prices at the pump, but it’ll take more pipelines for Albertan’s oil to trade on par with global prices.
“So much crude oil is locked in. There are restrictions as you know about how much crude oil can get out of the Alberta market,” he said.
Alberta says it doesn’t intend to curtail its production any further and that producers have already voluntarily cut back hundreds of thousands of barrels a day in response to market conditions.
Energy analysts predict this quarter, the cuts will increase to as much as one million barrels each day.
