(Adds comments from Alberta premier, federal finance minister)
By Rod Nickel
CALGARY, Alberta, March 9 (Reuters) - Alberta’s hopes of a rebound this year for its long-struggling oil industry have been dashed by a crash in global crude prices, dragging down producers’ stocks and leaving the Canadian province’s budget in shreds.
Alberta, home of the world’s third-largest oil reserves, has struggled for years as congested pipelines weakened prices and forced the provincial government to curtail production. Alberta Premier Jason Kenney planned to lift those curbs by year-end as pipeline projects advanced and as he anticipated better North American oil prices.
But Saudi Arabia’s plans to raise crude oil production significantly above 10 million barrels per day in April, after the collapse of OPEC’s supply cut agreement with Russia, are driving prices down.
“It’s brutal, this has zero to do with Alberta but the big kids fighting could hamper the economy here,” said Curtis Schirrmacher, investment adviser at Calgary-based Acumen Capital Partners, referring to Saudi Arabia and Russia.
“It’s going to be painful.”
The Toronto Stock Exchange energy index plunged 27%. Cenovus Energy Inc, a major oil producer, dropped more than 50%.
Alberta’s economy, which has Canada’s fourth-highest unemployment rate, depends heavily on oil.
Kenney’s United Conservative Party government last month released its 2020-21 budget with a lower C$6.8 billion ($4.99 billion) deficit, factoring in a $58 per barrel price to boost its oil revenues.
On Monday, West Texas Intermediate oil closed at $31.13, down 25%.
Kenney vowed at a news conference that “all options are on the table” to stabilize his province, although he gave few specifics.
In response to a question of whether Alberta could directly subsidize oil production, he said it was too early to eliminate any options.
“We will do everything in our power to get this province through this downturn,” he said, adding that he was looking for help from Prime Minister Justin Trudeau’s government.
Federal Finance Minister Bill Morneau said separately that Ottawa would announce measures this week to counter economic damage from falling oil prices and coronavirus.
Canadian production could contract by 500,000 bpd - or 10% - if low prices persist, Stifel FirstEnergy said in a note. But oil sands operations are technically challenging to shut in, the investment bank noted.
Ian Nieboer, managing director of consultancy RS Energy Group, said a sudden drop in Canadian oil production is unlikely. Oil sands sites, the source of most Canadian production, have high fixed costs and maintaining output, even at low prices, is better for the bottom line, he said.
The drop will, however, pressure Canadian oil companies to cut jobs and costs, Nieboer said.
Alberta’s production surged around the northern oil sands hub of Fort McMurray until prices crashed in 2014 on global over-supply, straining local economies.
The province’s recovery has since been delayed by staunch opposition to new pipelines.
With prices now collapsing, few see the end in sight.
“I’ve seen a lot of ups and downs and this is by far the worst,” said Morley Hansen, 67, who handles sales for oil services company Trojan Safety. “Who’s going to be here at the end? There’s going to be lots of people closing their doors.” ($1 = 1.3629 Canadian dollars) (Reporting by Rod Nickel in Calgary, Alberta; Editing by Marguerita Choy and Dan Grebler)