The next challenge for Canada's oil patch comes from the sea

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On Monday, the Saskatchewan government announced it would not be following Alberta's plan to cut oil production in an effort to reduce the punishing price differential plaguing energy producers.

On Dec. 2, Alberta Premier Rachel Notley announced a temporary mandatory oil cut of 325,000 bbls/d to address the province's current storage glut, a result of insufficient pipeline takeaway capacity.

The market price for Alberta oil rebounded Monday, but the discount Canadian producers have to stomach compared with the price their US counterparts get is still north of $30 a barrel.

Indeed, when Suncor reported third-quarter results on October 31, it said the discount on heavy Canadian oil prices was having a "minimal" impact on its operations.

About 25 Alberta producers are expected to be impacted by the curtailment until the 35 million barrels of oil now in storage are shipped out of the province.

Canada's largest oil and gas company, Suncor Energy Inc., said Monday its estimate of the impact of the provincial cuts will be provided when it issues its 2019 capital and production guidance.

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The premier made the announced in Edmonton on Sunday, adding that the federal government was to blame for the high oil price differential that has driven the price of Alberta crude to almost $45 below the world price for oil.

"What we now have is a serious glut in oil, which can't be resolved until OPEC gets together on Thursday and decides to cut back along with Russian Federation and a few other producing nations". That boosted Canadian crude prices and shares of major producers, but has had negative effects elsewhere.

Alberta has the legal authority to mandate the cuts because mineral rights are owned by the province.

Moe pointed out the market for Saskatchewan oil is different from Alberta's, because 60 per cent produced here is in the light to medium range, as opposed to the heavier product coming out of the oil sands.

Alberta's oil is selling a markedly lower rates compared with the North American benchmark, due in part to oil pipeline bottlenecks.

"We request that Energy Market Access and the Economic Impacts of the Price Differential be added as an agenda item for discussion this week". The reduction would drop to 95,000 barrels a day by the end of next year.

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"This is meant to be a short term fix to a very, very long term problem that has been in the making for years and years and years", he said.

Canada is the United States's top supplier of crude, sending more than 3.3 million barrels south daily, according to the National Energy Board.

Husky Energy does a lot of business in Saskatchewan's oil industry as well as Alberta's.

Moe said the province will continue to advocate for the federal government to create a long-term solution by building pipelines so both provinces can "sell our oil for what it is worth".

More broadly, the slide in USA oil followed a tumble in global stock markets on Tuesday, with investors anxious about the threat of a widespread economic slowdown. The cuts will be spread among companies producing at least 10,000 bpd, based on average production. "The poor finish to Q3 GDP had already put our call for a January rate hike by the Bank of Canada at risk, so we'll need to see some healthy readings for other sectors in the next few weeks to leave that view intact".

Conversely, S&P Global Platts' Critchlow said Qatar's exit from OPEC is not only a "big" event, but likely the most impactful event over the past two decades.

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