Canada will join a meeting of G20 energy ministers on Friday in an effort to stem the collapse in oil markets that has sent the global petroleum industry into a financial crisis.
The country is also making plans to meet with its North American partners to discuss energy.
The G20 talks, urged by Saudi Arabia and the Paris-based International Energy Agency, are the latest attempt to deal with the twin crises that have sent crude prices to nearly two-decade lows – a price war pitting the oil-producing kingdom against Russia and the COVID-19 contagion.
Federal Natural Resources Minister Seamus O’Regan will join the meeting if it proceeds as planned, a senior government official said.
Fatih Birol, the IEA’s executive director, said on Sunday he had spoken to Mr. O’Regan about the importance of the oil and gas industry to the country and the “hardship” the downturn is causing to the Canadian economy. He said on Twitter that the two agreed the Group of 20 developed countries could play a leading role in bringing stability back to the market, but did not offer details.
The IEA, which has 30 member countries and eight associate members, co-ordinates measures in the West to ensure energy security in times of crisis. It was created in the 1970s to help deal with Middle East oil embargoes and shortages, rather than the overabundance the world now finds itself with.
The source added that the Canadian government sees the G20 as the most promising venue to resolve the current oil crisis. The Globe and Mail has agreed not to name the source because they weren’t authorized to comment publicly.
Ian Cameron, spokesman for Mr. O’Regan, said he could not confirm the minister’s schedule. “This is a fast moving situation that continues to develop rapidly and we are working closely with international partners and the provinces to find possible solutions to protect the interests of Canadians," he said.
The G20 event is expected to follow another meeting among members of OPEC+, which includes the cartel members as well as Russia, Mexico and others. Those talks are now expected to proceed on Thursday after initial plans to hold it Monday were upended against a backdrop of last-minute squabbling.
Saudi Arabia has called on other countries, including Canada, to contribute with production curbs.
The extended timetable for any possible deal pressured oil prices on Monday. West Texas Intermediate crude fell 8 per cent to settle at US$26.08 a barrel. WTI is down nearly 60 per cent in three months.
The oil price war could not have come at a worse time for the oil industry and economies of producer countries, including Canada, the United States, Brazil and Norway, as well as the Organization of Petroleum Exporting Countries. With transport grinding nearly to a halt amid restrictions to control the spread of COVID-19, demand for fuel has tumbled by millions of barrels a day.
The government source said plans were also under way for an energy summit including Canada, the United States and Mexico.
Canada’s energy sector has been pummelled by prices for oil sands-derived crude that are well below any company’s ability to break even and the fear that available storage capacity could be filled up before the month is out. This would force more production to be shut off. Analysts have pegged the output that is now offline at around 700,000 barrels a day, and some have said that number could surpass one million.
All eyes are on Saudi Arabia and Russia, which must make meaningful cuts in output for any deal to have an effect on the market. A major wild card is the U.S., after President Donald Trump last week suggested the two could reduce production by 10 million to 15 million barrels a day. The United States has not committed to formal production cuts, though its industry has been shutting in output for economic reasons.
Helima Croft, global head of commodity strategy with RBC Capital Markets, said the key change this week is Russia’s apparent willingness to consider production cuts. The test at the meeting will be what the U.S. will bring to the table. Another question is whether Russia and the Saudis are willing to accept as a contribution the cuts the U.S. industry is already making, rather than mandated curtailment.
“This is forcing policy makers to decide – what do you really want? You can’t have everything. You can’t have higher prices, and potentially maintain your entire sanctions architecture on Russia, and let the free market decide at this point,” she said.
With the U.S. reluctant to participate in OPEC+ discussions, getting the G20 involved is a “genius” way to continue dialogue and build consensus, even if success is not guaranteed, Ms. Croft said.
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