We forecast that Canadian liquids production in April was higher by 33 thousand b/d m/m to 5.3 mb/d, (+ 0.47 mb/d y/y on lower upgrader maintenance). Synthetic production fell by 0.10 mb/d m/m as spring maintenance continued, however mined production was up 0.10 mb/d increasing total bitumen production by 0.17 mb/d m/m. In situ production was lower by 17 thousand b/d m/m.
Final data for March show Canadian liquids production up m/m by 65 thousand b/d to 5.31 mb/d (+86 thousand b/d y/y), higher than our forecast of a 17 thousand b/d m/m increase. The largest m/m increase came from conventional crude, which was higher by 33 thousand b/d despite flat offshore production. Onshore conventional production rose in Saskatchewan to the highest level since March 2018 while output also rose in Alberta despite a 0.25 mb/d government-mandated cut still in place for the month (the mandated cut is set to fall to 0.2 mb/d in June and July). Bitumen production rose by 20 thousand b/d m/m and NGL production increased 16 thousand b/d m/m. Exports by rail rose by 38 thousand b/d m/m to 0.17 mb/d, from an 18-month low in February, after March crude inventories surged and depressed differentials to open up the rail arbitrage. This was not enough to prevent further inventory builds in Alberta for April (+2.5 mb), with stocks some 7 mb higher by end-April compared to January. That said, with rail movements picking up further, anecdotal reports suggest a sharp drop in stocks in May.
Wildfires briefly shut in 75 thousand b/d of production in Alberta, primarily at Canadian Natural’s Pelican Lake and Woodenhouse facilities, where personnel were evacuated on 30 May. The outage was short-lived and production was restored on 9 June. The WCS differential rallied on the news by $3.50 per barrel but has since surrendered $1.05 per barrel of those gains. June apportionment came in at 46% on Lines 4 and 67, with Lines 2 and 3 at 40%. Apportionment on the heavy lines was the highest for the year as Joilet and Whiting refineries returned from work.
Investment concerns regarding Canadian oil sands continue as pipeline companies face more hurdles. Enbridge’s Line 3 awaits another possible environmental review after the Minnesota Court of Appeals overturned an earlier approval. The pipeline project has already been pushed to H2 20, but the news is another blow to the already challenged Canadian pipeline system. Husky announced that it would reduce capital spending in western Canada until midstream capacity catches up with production. The company said it would lower spending by roughly 10% per year over 2019 to 2022. Finally, Devon sold its entire 0.11 mboe/d of Canadian assets to Canadian Natural, which includes the new Jackfish site.