Oil-producing province Alberta eases April crude production limit

By Nia Williams

CALGARY, Alberta (Reuters) - Canada's main oil-producing province of Alberta on Thursday raised the amount of crude that companies can produce in April to 3.66 million barrels per day, an increase of 100,000 bpd from the limit imposed in January.

Late last year congestion on oil export pipelines backed up crude in storage tanks and sent crude prices in the province tumbling to record lows. The slump prompted the Alberta government to mandate temporary production cuts effective Jan. 1 that took 325,000 bpd out of the market.

The province is now raising the limit because the amount of oil in storage is shrinking and prices are stronger, Alberta premier Rachel Notley said in a statement. Pipeline transportation capacity could also increase because less diluent, used to help viscous heavy crude flow, is needed as the weather warms up.

"The decision to temporarily limit production was applied fairly and equitably, and our plan is working to stop allowing our resource to be sold for pennies on the dollar," Notley said.

The discount on Canadian crude versus U.S. barrels has narrowed dramatically. On Thursday the benchmark heavy grade Western Canada Select for March delivery in Hardisty, Alberta, last traded at $12.65 a barrel below U.S. crude, according to brokers Net Energy. Last October the discount was more than $50 a barrel.

Production for February and March was set at 3.63 million bpd, adding 75,000 bpd from the January limit. The latest adjustment means producers can increase output by another 25,000 bpd in April.

The oil cuts averted disaster for many small producers that were selling crude in some cases below cost but were unpopular with some larger companies like Husky Energy and Suncor Energy that had benefited from running cheap crude through their refineries. Curtailments do not apply to small companies producing less than 10,000 bpd.

(Reporting by Nia Williams; Editing by Sandra Maler)