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“We’re below shut-in levels” with current prices, said Tim Pickering, founder and chief investment officer of Auspice Capital Advisors Ltd. in Calgary. There’s currently no incentive to ship Canadian crude to the U.S. Gulf Coast and producers may take oilsands projects offline sooner than planned for annual maintenance because of the depressed prices, he said. “We’re the last barrel produced and we’re the first barrel shut in.”

Canadian producers are being cushioned somewhat by the weak loonie, the common name for the the nation’s dollar coin that’s seen its value shrink along with crude. Most of the country’s oil output is exported and producers are paid in U.S. dollars, while many of their expenses for labour and equipment are paid in cheaper Canadian dollars. The nation’s total production is still poised to rise 3.9 per cent this year, according to the Canadian Association of Petroleum Producers, as oilsands expansion projects under way advance.

Still, the pain is being felt across Canada’s largest oil-producing province, Alberta. Energy companies are shelving new oilsands projects and have cut more than 40,000 jobs across the country, the industry’s main lobby group estimates. Capital spending for the 25 largest producers is poised to fall for a second straight year, dropping another 16 per cent in 2016, data compiled by Bloomberg show.

West Texas Intermediate for February delivery declined US$2, or 5.6 per cent, to US$33.97 a barrel on the New York Mercantile Exchange. It was the lowest close since December 2008. Total volume traded was 22 per cent higher than the 100-day average at 3 p.m.

Brent for February settlement fell US$2.19, or 6 per cent, to US$34.23 a barrel on the London-based ICE Futures Europe exchange. It was the lowest close since June 2004. The European benchmark crude closed at a 26-cent premium to New York futures.

Bloomberg News