Cenovus backs further Alberta production cuts to avoid storage crunch

Credit: REUTERS/TODD KOROL

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TORONTO, April 2 (Reuters) - Canadian oil sands producer Cenovus Energy Inc CVE.TO would support further mandated Alberta production cuts to prevent crude storage from hitting full capacity, a company spokeswoman said on Thursday.

The Canadian industry could be forced to curtail up to 1.7 million barrels a day, or a third of the country's total production, as major U.S. refineries throttle output and storage capacity runs out, Royal Bank of Canada analysts said on Thursday.

Global crude demand has fallen by a third or 30 million barrels per day in the past few weeks as some 3 billion people have been put in lockdown to slow the spread of the coronavirus.

Alberta, home to the world's third-largest crude reserves, has about 40 million barrels of storage capacity, and stocks recently sat at around 30 million barrels, the RBC analysts said.

"We would support further mandated curtailment if government decided it was necessary to prevent storage from getting near full capacity," Cenovus spokeswoman Sonja Franklin said.

Alberta Premier Jason Kenney's United Conservative Party government has steadily eased production curtailments imposed a year ago to drain a glut of oil in storage that built up because of congested pipelines.

On Thursday, Kenney said he had spoken with U.S. officials about possibly coordinating North American production cuts.. But last week, he said there was no point forcing producers to curtail additional output because they were cutting back voluntarily to cope with prices that had plunged below $5 per barrel for the province's extra-heavy oil.

Earlier on Thursday, Cenovus said it would reduce its full-year capital spending by another C$150 million ($106 million) and suspend its dividend.

(Reporting by Jeff Lewis; Editing by Franklin Paul and Peter Cooney)

((Jeff.Lewis@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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