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Canada, G20 agree on need for stable oil price; mum on calls to cut output

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OTTAWA — Canada and its G20 partners won’t yet be following OPEC nations by cutting production to stop spiralling oil prices caused by the COVID-19 crisis and a price war between Saudi Arabia and Russia, Canada’s energy minister said Friday.

But when Natural Resources Minister Seamus O’Regan emerged from his video conference with his fellow G20 energy ministers, he said they agreed on policies and the general principle that a stable global energy market is tied to everyone’s security and prosperity.

READ MORE: As coronavirus cases rise, Canada’s top doctor says health system coping for now

The G20 meeting came one day after the OPEC cartel and its partner countries agreed to measures to boost oil prices by cutting production by a tenth of global supply, or as much as 10 million barrels a day.

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“We did not discuss numbers. It was not about numbers,” O’Regan said.

He billed the meeting a success in part because it appeared Russia and Saudi Arabia — both G20 members — played nice on finding a common solution after their international oil price war.

In March, Russia would not agree to cut its output, so an angry Saudi Arabia responded increasing its oil production and reducing its price.

“It was really quite something, that they were, that everybody agreed on the need for price stability. Solidarity is the world that came to mind,” said O’Regan.

Coronavirus outbreak: Canada ‘very engaged’ with global community to address drop in global oil prices
Coronavirus outbreak: Canada ‘very engaged’ with global community to address drop in global oil prices

“It’s not where we need to be yet. But I think it’s certainly a step in the right direction, and we’re much further ahead I think today than we were yesterday.”

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O’Regan repeatedly refused to speculate on whether Canada might consider curtailing its production as part of the broader multilateral effort to bring much-needed stability back to the global energy market.

He said it is no secret that production has dropped in Newfoundland, Alberta and Saskatchewan and that consumers are hurting. Alberta alone has seen its daily production drop by 80,000 barrels.

Earlier Friday, Prime Minister Justin Trudeau would not say whether Canada would take measures to reduce its output.

READ MORE: Global deal in the works to pump less crude oil, stabilize market

“As we know, Alberta has already curtailed production and has for some time now,” he said.

“We’re going to continue to look to make sure that other countries are doing their part and that people understand the most important thing through this is to ensure that families and workers across the country, and indeed around the world, are getting the support they need to get through this crisis safely.”

OPEC, allies discuss oil production reduction
OPEC, allies discuss oil production reduction

O’Regan said the long-awaited bailout for Canada’s energy sector is coming soon, but he didn’t say when.

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He did say it would contain measures to improve “liquidity” for the energy companies.

While cheaper gas prices might look good for consumers at the gas pumps, O’Regan said: “When you have a healthy oil and gas market in this country, it has a huge impact on the national economy.”

READ MORE: Alberta oil sector hopeful as OPEC, allies agree to production cuts

Canada is the world’s fourth largest oil producer and the sector employs directly or indirectly more than 830,000 people.

A healthy energy sector is also vital to Canada in its fight against climate change and for the eventual transition to cleaner, renewable sources of energy, O’Regan said.

“The only way you can do that really is by working with our oil and gas industry” because of innovations in the industry itself, he said.

“Every facet of the economy is hurting,” O’Regan said, but oil and gas is taking a significant hit. “Nobody’s driving, nobody’s flying.”

On Friday afternoon, Alberta Energy Minister Sonya Savage issued a statement and noted her government took part in an OPEC video meeting on Thursday.

“We are cautiously pleased to see that OPEC+ has agreed to reduce production by 10 million barrels per day,” her statement read in part. “Reliable energy is the lifeblood of any modern economy, and Alberta is home to the third-largest oil reserves in the world. Our energy sector represents almost one-tenth of Canada’s gross domestic product and supports over 500,000 jobs across the country.

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“The decision to surge supply in the face of the collapse of energy demand triggered by COVID-19 has endangered jobs throughout Alberta and Canada, while forcing North American storage to near capacity.”

She noted that the agreement to implement production limits by OPEC+, “brings global energy producers in line with measures that Alberta has reluctantly taken since January 2019.”

“For our part, we have already seen Alberta producers voluntarily lower their production and cut their capital spending due to decreased demand because of the COVID-19 pandemic,” the statement goes on to say.

“However, demand will return as economies around the globe recover from this pandemic. Life will return to normal. In the interim, we hope that the measures taken by OPEC will stabilize the global price of oil and prevent further stress to energy workers in Alberta.”

–With files from Global News’ Phil Heidenreich