Canadian Natural Resources Ltd, or CNRL, says it will drop its output this spring as bottlenecks in crude transportation in Canada continue to pressure oil prices. CNRL photo.
CNRL shares down 2 per cent Thursday
Canadian Natural Resources Ltd, or CNRL, said on Thursday that it will produce less crude than expected this spring due to lower oil costs as a result of bottlenecks associated with the transportation of crude.
Earlier in the year, Canadian crude producers struggled to get their oil to market. Production rose, but pipelines were operating at capacity and rail companies were focussed on transporting agricultural goods instead of oil.
As a result, Canadian crude was trading at a heavy discount compared to US West Texas Intermediate. The crude transportation crunch has eased recently and the discount is closer to average levels.
However, shipments to the US Gulf Coast are still being impacted by a regulator-mandated reduction in capacity on TransCanada’s Keystone pipeline following a leak late last year in Marshall County, North Dakota.
Analysts with GMP First Energy say “At this stage, we are of the view that the pipeline will be allowed to return to full operating pressure by the end of the second quarter of 2018.”
CNRL projects production in the second quarter to reach 1.054 million barrels of oil equivalent per day, down from analysts’ average estimate of 1.134 million, according to investment bank Tudor, Pickering, Hold & Co.
Despite the decline, this forecast output would exceed 2017 production.