NEW YORK/VANCOUVER (Reuters) - Several oil companies in Canada pushed back on Monday against Alberta’s mandated cuts in crude production, warning about excessive government intervention even as the discount on Canadian crudes narrowed sharply on the curtailment plan.

FILE PHOTO: A tanker truck used to haul oil products operates at an oil facility near Brooks, Alberta, Canada April 18, 2018. REUTERS/Todd Korol/File Photo

Alberta Premier Rachel Notley said on Sunday the government would force producers to cut output by 8.7 percent, or 325,000 barrels per day (bpd), until excess crude in storage is reduced.

The move is unusual for a market economy like Canada, in comparison with members of the Organization of the Petroleum Exporting Countries whose oil companies are often state-owned.

Prices for Canadian grades of crude oil moved sharply upward Monday, narrowing the deep discounts they had been trading at, relative to their U.S. counterparts.

While producers said they would comply with the mandatory cuts, executives from Canada’s Suncor Energy Inc, Husky Energy Inc and Imperial Oil, integrated producers with domestic refinery and upgrading capacity, expressed disappointment.

“We believe the market is working and view government-ordered curtailment or other interventions as possibly having serious negative investment, economic and trade consequences,” said Husky in a statement.

However, major producers like Cenovus Energy Inc and Canadian Natural Resources Ltd were vocal with their support.

“At $35 or $45 differentials - the lion’s share of companies in this industry are barely breaking even or actually losing money,” Cenovus Chief Executive Alex Pourbaix said in an interview.

Canada is one of the world’s largest oil producers, supplying more than 4.2 million barrels a day, but WCS prices slumped in October to a discount of more than $52 a barrel below WTI due to the transportation constraints and storage glut.

Heavy Western Canadian Select oil traded at a $25 a barrel discount to U.S. crude on Monday, compared with a $32 discount on Friday. Light synthetic crude from the oil sands settled at $17 below the benchmark, $8 narrower than Friday.

Following the cuts, Pourbaix said Cenovus expects discounts closer to $20 a barrel in 2019, supporting investment of C$1.5 billion ($1.1 billion) in 2019, in line with 2018 capital spending. “That would not have been the case if the government hadn’t take action,” Pourbaix said.

Suncor is assessing the impact of the government’s announcement, it said, noting that the market is the most effective means to balance supply and demand and normalize differentials.

“Less economic production was being curtailed and differentials were narrowing as a result of market forces,” Suncor said in a statement, adding that specific effects from the cuts will be discussed in its upcoming 2019 outlook.

Imperial Oil CEO Rich Kruger said the company was reviewing the impact on its investments.

But CNRL cheered the Alberta government’s move, noting “these are unprecedented times and they call for urgent action.” Nexen, a subsidiary of CNOOC Ltd, said the actions would help strengthen the Alberta economy.

MORE OIL, NO PIPES

Canada’s production has steadily increased over the last year and is set to grow some 17.8 percent through 2020, according to the Canadian Association of Petroleum Producers, but shipments have been constrained by the lack of pipelines out of Alberta to the United States and overseas markets.

Several projects, including TransCanada Corp’s Keystone XL to the United States, and the expansion of the government-owned Trans Mountain pipeline to the West Coast, have been hamstrung by battles with opponents.

“The heavy-handed action is a short-term remedy but not long-term solution,” said Michael Tran, commodity strategist at RBC Capital Markets. “Rail cars aside, there’s no long-term solution that does not involve building a pipeline.”

The mandated cuts are controversial because heavily integrated producers, like Suncor and Husky, benefit from the low crude prices to feed their refineries. They also tend to have more secure pipeline access.

“Producers that don’t have refineries and were having to place their barrels on the spot market without pipeline capacity are the ones that are really benefiting from this,” said Kurt Barrow, vice president of oil markets and downstream at IHSMarkit.

Shares of companies like Cenovus and Canadian Natural Resources that lack refining capacity rose, while shares of some companies with refineries, like Imperial Oil, fell.

($1 = 1.1724 Canadian dollars)