Inventories hit record highs despite oil production curtailments
Western Canadian crude oil storage inventories hit a record high of 37.1 million barrels in April, according to data from energy information provider Genscape, as Alberta government production cuts failed to reduce a glut of oil in the province.
Genscape told Reuters the build in inventories was due to lower pipeline flows out of Canada’s main crude-producing province, while crude-by-rail shipments remain below the high levels they hit late last year.
Alberta imposed temporary oil production curtailments effective January 1 after congestion of export pipelines last year led to a buildup of crude in storage tanks and record discounts on Canadian heavy crude versus U.S. oil.
Producers in Canada’s energy heartland were limited to producing 3.66 million barrels a day in April. That will rise by 25,000 bpd in May and a further 25,000 bpd in June.
The sharp inventory increase in April follows a smaller increase in March and raises questions over whether the new United Conservative Party government will increase curtailments.
Stocks rose 2.5 million barrels between the weeks ending April 5 and 26, an increase of nearly 117,000 barrels per day.
“Record-high stocks in late April were a clear signal that the province’s efforts to control supply had so far been unsuccessful in alleviating the glut,” Genscape analysts said in a note.
Genscape said lower flows on TC Energy’s Keystone pipeline in the week ending April 26 contributed to the inventory build.
Canadian crude-by-rail loadings rose by 47,000 bpd in April from the previous month to total 197,000 bpd, Genscape data showed. That was well below the 350,000 bpd that Canada exported in December, according to data from the National Energy Board.
Crude-by-rail loadings dived at the start of this year after government curtailments boosted Canadian crude prices dramatically, which in turn made shipping barrels by rail uneconomic and contributed to stubbornly high inventories.