An oil pump jack pumps oil in a field near Calgary.© Todd Korol / Reuters
Canadian energy shares leaped after the federal government approved two major oil pipelines and OPEC agreed to limit output for the first time since 2008.
The Toronto Stock Exchange's energy sub-index was up 8.6 per cent in mid-day trading on Wednesday. Big gainers included Canadian Natural Resources Ltd. (10.1 per cent), Encana Corp. (12.6 per cent) and Cenovus Energy Inc. (10 per cent).
Oil prices jumped more than 8 per cent to just under $50 (U.S.) a barrel on news the Organization of Petroleum Exporting Countries agreed to curb output after more than two years of pumping flat out to defend market share, Reuters reported.
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Further supporting prices was a report from Washington's Energy Information Administration that said U.S. crude oil inventories fell by about 900,000 barrels last week.
Prime Minister Justin Trudeau late on Tuesday approved Kinder Morgan Canada Inc.'s Trans Mountain pipeline and Enbridge Inc.'s Line 3 to the U.S. Midwest. Both projects still face resistance from environmentalists and some First Nation groups, but the decisions should give large oil sands companies some confidence to contemplate growth after more than two years of contraction, Raymond James Ltd. analyst Chris Cox said in a research note.
"Needless to say, some measure of comfort around the future direction of oil prices is also required, given the large up front capital requirements," he said.
"Importantly, with this longer-term visibility on market access now in hand, we do see positive implications for investor sentiment with respect to the Canadian large cap producers in the context of an eventual oil price recovery, which we believe may be an under-appreciated takeaway."
He said Cenovus Energy Inc. may look to revive its phase G expansion at its flagship Christina Lake project. Imperial Oil Ltd. is also likely to proceed with its steam-driven Aspen development, Mr. Cox said.
Kinder Morgan said it aims to start construction on the $6.8-billion (Canadian) pipeline expansion by September next year, with start-up pegged for late 2019. The project is supported by 13 major oil sands companies. It would boost capacity on the Edmonton to Burnaby, B.C. network from 300,000 barrels a day to 890,000 barrels.
Enbridge has said its $7.5-billion Line 3 could start up in 2019, restoring capacity on the system to 790,000 barrels per day, from about 390,000 barrels today.