(Reuters) - Cuts to Alberta’s oil production have been large enough to avoid filling storage tanks to the brim as the coronavirus pandemic slashes demand from refiners, two of Canada’s largest crude producers said on Wednesday.
A crash in crude prices due to global economic restrictions has forced oil companies to cut costs and production. Analysts warn that global storage levels are fast approaching capacity.
But storage levels in Alberta, the main Canadian crude-producing province, are “flat” around 32 million to 33 million barrels, Cenovus Energy (CVE.TO) Executive Vice-President of Downstream Keith Chiasson said.
Levels could still spike to tank-top levels of 43 million barrels, Chief Executive Alex Pourbaix warned.
“We are seeing the market is working,” Pourbaix said on a quarterly conference call. “We’re not seeing massive growth in storage but it’s important we watch that.”
Husky Energy (HSE.TO) echoed those comments.
“Supply and demand in North America are going to equalize over this quarter because they have no option - storage runs out,” Husky Chief Executive Rob Peabody said on a call. “Market forces are doing exactly what they’re supposed to do.”
Canada’s oil cuts are likely to reach 1.2 million barrels per day (bpd) in the second quarter and a storage “crisis” will test operations, consultant Rystad Energy said on Monday.
Alberta Premier Jason Kenney has repeatedly warned that storage levels are in danger of reaching capacity.
Cenovus has cut 60,000 bpd and could expand cuts to more than 100,000 bpd if necessary, Pourbaix said. Husky has shut in 80,000 bpd.
Both companies said they saw no need for the Alberta government, which has managed production levels for more than a year, to take further action on output limits.
Cenovus and Husky posted quarterly losses, hammered by a price war between Saudi Arabia and Russia and the pandemic.
Husky said it would cut its dividend by 90%.
Cenovus said prices for its crude tumbled 54% to C$22.74 per barrel in the first quarter from a year earlier.
Weak demand for gasoline, jet fuel and other products hurt refining units at both companies as more people stayed at home due to lockdowns.
Cenovus posted a net loss of C$1.80 billion ($1.29 billion), or C$1.46 per share, while Husky’s loss was C$1.71 billion, or C$1.71 per share.
Husky said it took non-cash asset impairments of C$1.1 billion, primarily related to the producing assets in North America and lower crude oil prices.
Reporting by Rod Nickel in Winnipeg and Arundhati Sarkar in Bengaluru; Editing by Ramakrishnan M. and Alistair Bell