The Canadian oil-producing province of Alberta will increase crude production limits by 25,000 barrels per day (bbl/d) in May and a further 25,000 bbl/d in June, the government said on March 18.
The increases mean that by June, oil companies will be limited to 3.71 million barrels per day (MMbbl/d) of production.
Alberta mandated production cuts this year to ease congestion on export pipelines that resulted in crude getting bottlenecked in storage and the discount on Canadian heavy crude widening to record levels.
"This temporary policy has been critical to reducing the oil price differential while we move ahead with our medium-term plan to ship more oil by rail and lead the long-term charge for new pipelines as we fight to get full value for the resources owned by all Albertans,” Premier Rachel Notley said in a statement.
The government said the increase in production limits comes as warmer weather reduces the amount of diluent needed to help oil sands bitumen flow through pipelines, increasing capacity.
Diluent is any ultra-light hydrocarbon mixed with viscous bitumen to enable it to flow.
The government said giving production limits two months in advance gives the energy industry and markets greater certainty when making decisions.
Some producers like MEG Energy supported curtailments because the move boosted prices, but it was criticized by integrated producers including Suncor Energy and Imperial Oil whose refining operations were benefitting from cheap crude.
Critics also blasted the government for making crude by rail shipments uneconomic and adding to volatility in the Canadian crude market.
On March 15, Imperial canceled a $2.6 billion oil sands project in northern Alberta, blaming the uncertainty caused by government intervention in the market.
Alberta is leasing 4,400 rail cars to ship 120,000 bbl/d of crude out of the province and ease pipeline congestion, with the first shipments due to begin in July.
The latest production limit increase comes the same day Alberta opened its final legislature session before a provincial election that polls suggest will see Notley's left-leaning government cede power to the United Conservative Party.
Recommended Reading
Shale Drillers Squeezed as Banks Tighten Credit after Oil Crash
So far in the spring season of redeterminations, the total borrowing base for three dozen publicly listed North American oil companies has been slashed by $7.5 billion, according to a Reuters analysis.
From Oil and Gas Investor Editor-in-Chief: The Great Awakening
Following a hurricane-like second quarter, the good news is the third quarter has arrived, and the oil and gas industry is at work cleaning up debris and trying to find a sense of normalcy. The questions are in what order, and will the calm winds last?
Global Oil Demand Likely Peaked in 2019, Energy Consultancy Firm Says
Norway-based consultancy DNV GL said global energy use would be 8% lower in 2050 than previously expected due to the impact of the pandemic.