Alberta says oil prices jeopardize surplus target

Wed Dec 19, 2012 5:26pm EST
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* Western Canada Select oil has fetched $40 under WTI

* No new pipeline capacity expected in near term

* Government departments brace for spending cuts

By Jeffrey Jones

CALGARY, Alberta, Dec 19 (Reuters) - Depressed Canadian crude oil prices have the government of Alberta worried it might not meet its target of moving back to budget surpluses next year, the Western Canadian province's finance minister said on Wednesday.

As a result, all government departments will be examining ways to hold the line on spending in the coming weeks as heavy oil prices keep lagging expectations, Finance Minister Doug Horner told reporters.

"We have a situation here that is growing faster than anyone predicted, in the sense that the market access is causing us to back up even faster than we thought because of the new production numbers in the United States, because of the delay in the United Sates recovery and because they are our one customer for the majority of our business," Horner told reporters in Edmonton.

In the past month, the price of Western Canadian Select heavy oil has been $35-$40 a barrel less than that of U.S. benchmark West Texas Intermediate, a spread not seen for about five years, due to growing oil sands production and limited pipeline space to key markets such as the U.S. Midwest.

That put the price of Canadian crude at around $45-$50 a barrel in some deals for January delivery, compared with $85 and more for WTI.   Continued...