CALGARY, Alberta, March 9 (Reuters) - Alberta's hopes of a rebound this year for its long-struggling oil patch 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 its prices and forced the provincial government to curtail production since January 2019. Alberta Premier Jason Kenney planned to lift those curbs by year-end as pipeline projects advanced, and as he anticipated a bounce in North American oil prices.
But Saudi Arabia, the world's top oil exporter, now plans to raise its crude oil production significantly above 10 million barrels per day (bpd) in April, after the collapse of OPEC's supply cut agreement with Russia, driving down prices.
"It’s brutal, this has zero to do with Alberta but the big kids fighting could hamper the economy here,” said Curtis Schirrmacher, investment advisor 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 revenues.
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 hovered around $31, down 25% on the day.
The Alberta premier was scheduled to speak on Monday afternoon.
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 and such curtailments can damage the reservoir or ore, the investment bank said.
Ian Nieboer, managing director of consultancy RS Energy Group, said he thinks it is unlikely that there will be a sudden drop in Canadian oil production. Sites in the oil sands, where most production comes from, 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 to save cost, Nieboer said.
In a province known for its booms and busts, the latest decline stands out for some.
“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 in Calgary. “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)