Alberta Premier Rachel Notley said Sunday night oil producers will need to cut output by 325,000 barrels a day, or 8.7 per cent, starting in January.
The mandated cut ends on December 31, 2019. Ms. Noltey said the price gap was costs the national economy about $80-million daily, has been blamed on the many roadblocks to building new pipelines in Canada.
"Ottawa's failure in this area has left Alberta's energy producers with few options to move their products, resulting in serious risks for the energy industry and Alberta jobs", reads a release from the province.
The curtailment is seen as a way to reduce volatility and narrow the price differential by at least $4, adding an estimated $1.1 billion to government revenue for 2019-20.
The discount of Western Canadian Select crude to US benchmark West Texas Intermediate oil narrowed $9.25 to $19.75 a barrel as of 10:11 a.m.
"We're facing, I think, something that qualifies as a crisis, or very almost that, and there are no other tools available to the provincial government so given that the market or even coalition of players in the market can't do this on their own without running afoul of price fixing laws, this is something that makes a lot of sense for all of the parties but I give full credit, not just to the fact that they are agreeing on this, but that they're saying that they don't want this to be about partisan politics and they want it to be about the interests of Alberta and I have no question that Albertans want to see more of that kind of collaboration", she said.More news: Donald Trump Praises Roger Stone 'Guts' for Standing Up to Robert Mueller
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Announcing the measure on Sunday, Premier of Alberta Rachel Notley said that the province is "facing a hard challenge", but the move is aimed to reverse an unprecedented price gap that has seen the province's crude sell for significantly less than the global price. I can't promise the coming weeks and months will be easy, but I can promise we will never back down in our fight to protect jobs and the resources owned by all Albertans. She was steely-eyed and - dare I say it - at some moments evocative of Margaret Thatcher on the eve of that war at the south end of our then-still-chilly planet. Bloomberg's spot price for WCS is US$32.91 a barrel, up $10.98 from the previous close. Obviously, if you're a small producer the value of that exemption is greater for them than it is for the larger producers.
"We're taking every possible tool that we have in our toolbox to bring in more investments", he said.
The measure could be removed earlier than the end of 2019, based on market conditions, the government said.
Saskatchewan Premier Scott Moe said in a statement that the province isn't considering following Alberta's example in cutting oil production.
"With so much oil just sitting there, unable to be moved, it is being sold at fire-sale prices, around $10 a barrel", she wrote. "This is an extreme case".
One oil market analyst told CTV Edmonton that the province seemed to be "making the best out of a bad situation" and had no true winning moves.