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A shut-in well site near Lloydminster, Saskatchewan.Dan Riedlhuber/Reuters

Canada has seen the most production curtailed in response to depressed prices of any major oil producer, a leading consultancy said Friday, though many companies in Western Canada and elsewhere are willing to record an operating loss to keep some revenue flowing.

With North Sea Brent at just $35 (U.S.) a barrel, Britain-based energy consultants Wood Mackenzie said it costs more to extract the 3.4 million barrels of global production a day than can be fetched in revenue.

To date, however, it said fewer than 100,000 b/d of production has been shut down, though there has been a sharp drop in the investment and drilling activity needed to tap new supplies.

"Canadian production from oil sands and conventional onshore is taking the most pain due to the high costs and distance from marketplace," the Wood Mackenzie analysts said.

They estimated that 30,000 b/d of Canadian production has been shut in, mostly from old wells in Alberta and British Columbia, while there have been few production cuts in the oil sands despite high operating costs.

At current prices, Canada has 2.2 million b/d of production that has negative cash-operating costs – that is, operating costs minus interest, depreciation and overhead – though much of that is in the oil sands, where there are major barriers to cutting existing production, they said.

Producers across the world have slashed capital budgets and laid off staff in response to the slump in oil prices, and they are not expecting significant relief until the second half of 2016, unless the Organization of Petroleum Exporting Countries (OPEC) unexpectedly engineers a cut in global supply.

Crude markets held steady on Friday as traders weighed the news of proposed talks among OPEC producers against the continuing overproduction and buildup of crude stockpiles. Venezuelan Petroleum Minister Eulogio del Pino will meet on Sunday with Saudi counterpart Ali al-Naimi in Riyadh, after his discussions with the Qatari and Omani oil ministers this week. The Latin American producer is desperate to see higher crude prices as its oil industry is the main source of government revenue and funding for social programs.

Brent settled up slightly Friday at $34.52, while West Texas intermediate lost ground to $31.47, even as the closely watched index of operating drilling rigs fell for the seventh straight week to the lowest level since March, 2010.

Traders were whipsawed this week after some Russian oil executives appeared willing to meet with OPEC to discuss production cuts, others in Moscow said they weren't, and there was a clear lack of interest from Saudi Arabia.

"There is still no real indication from the Saudis that they are serious about this push for a deal," said Greg Priddy, a Washington-based analyst with Eurasia Group consultancy. He said there is no reason to believe the Russians would honour a production-cutting deal, while Iran is eager to boost its output in the aftermath of sanctions and Saudi Arabia is unwilling to yield market share to their Persian Gulf rival.

As a result, crude prices will remain under pressure through the first half of this year, until the surplus production is rebalanced through demand growth and the decline in new production resulting from industry spending cuts, Mr. Priddy said.

Western Canadian producers will continue to pump from existing wells and projects so long as the price does not fall too far below operating break-even levels, Jackie Forrest, an economist at ARC Financial Ltd., said on Friday. Many companies would be worse off if they cut production because their fixed costs would remain high and they'd see lower revenue, she said.

The most notable Canadian company to cut production is oil sands producer Connacher Oil and Gas Ltd., which announced last month it would reduce output at its Great Divide project to less than to 4,000 b/d – down from 13,900 b/d in the fourth quarter.

Canadian Natural Resources Ltd., whose operations span Western Canada, curtailed nearly 5,600 b/d of so-called conventional heavy-oil output last year. Baytex Energy Corp. has suspended about 2,400 oil-equivalent b/d at its Canadian operations.

Among the most vulnerable are companies that produce 400,000 b/d of conventional heavy crude in Alberta and around Lloydminster, Sask., Ms. Forrest said. Many of those producers have high variable costs and could reduce production without damaging the wells or incurring massive shut down and startup costs.

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