UPDATE 2-Canada's Alberta cut budget surplus, oil price forecast

Wed Nov 26, 2014 5:54pm EST
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(Recasts lead with forecast lower price for oil, adds economist comment in fourth paragraph)

By Scott Haggett

CALGARY, Alberta Nov 26 (Reuters) - The Canadian province of Alberta, the largest exporter of oil to the United States, cut its forecast budget surplus on Wednesday and sharply lowered its projection for the price of crude.

Robin Campbell, the province's finance minister, said in his second-quarter budget update that Alberta expects to post a C$933 million ($830.8 million) surplus in the 2014/2015 fiscal year, down from the C$1.1 billion it forecast in March when it presented the budget.

Alberta, whose oil sands are the world's third largest crude reserve, relies on payments from its oil and gas sector for about a third of its budget.

Despite a 30 percent drop in benchmark crude prices since late June, the province bumped up its overall revenue expectations to C$45 billion, up more than C$600 million from its budget.

"Oil revenues are down right now but understand the Alberta economy is doing great," Campbell told reporters on a conference call. "Our forest industry is doing well, agriculture is doing well, we're doing well in manufacturing."

The forecast for operating spending, which excludes capital projects, rose to C$40.9 billion, up from C$40.4 billion called for in the March 2014 budget. The forecast for capital grants, largely related 2013 flood assistance, rose C$334 million from its projection in the budget.

"It looks like the Province of Alberta will pull through (the fiscal year) relatively unscathed, but some tougher questions lie ahead if oil prices don't bounce back," Robert Kavcic, senior economist at BMO Capital Markets, wrote in a research note.   Continued...