OPEC and its allies agreed on Thursday to cut their oil output by 10 million barrels per day (bpd), with another 5 million bpd expected to come from other nations to help deal with the deepest oil crisis in decades.
Global demand for oil has fallen between 20 and 30 per cent, but last month, following dispute between Saudi Arabia and Russia, OPEC ramped up production.
As a result, commodity prices collapsed.
A barrel of West Texas Intermediate, the North American benchmark, has hovered around US$20 a barrel — a low not seen in close to two decades.
However, Alberta crude, which trades at a deep discount, has plunged to new records, hitting a low of less than US$4 a barrel at one point last week.
Patrick Smith, a policy analyst with the Canada West Foundation, cautions that even a historic production cut by OPEC and its allies may not be enough to help Alberta out of this crisis.
“The reality is that no one is buying oil and the world is running out of places to put it,” Smith said.
“So while it’s essential that we do have production cuts to help stabilize the market, it’s more likely to guarantee a price floor and help buy time for all oil producers including Alberta.”
Major oil producers have slashed more than $8 billion from their budget in recent weeks, forcing smaller oil field service companies to make difficult decisions about their own operations.
“It’s hard to see the challenges many of these small- and medium-sized businesses are dealing with,” said Canadian Association of Oilwell Drilling Contractors President Mark Scholz.
“Carnduff is a community of 1,100 people — that’s 20 per cent of the community.”
Scholz is calling on the federal government to come through with more help for the sector. Federal Finance Minister Bill Morneau said last month aid for the oil sector was “hours, potentially days” away, but details have yet to be released.
Scholz says livelihoods are at stake.
“We will see casualties no question and the number will be determined by how much federal support we get.”
— With files from Reuters