UPDATED: The value of Norway’s currency, the krone, fell along with the price of oil after members of the OPEC oil cartel failed to strike an agreement over the weekend that would have raised oil prices. At least one Norwegian oil analyst, however, thinks the renewed weakness is only short-term, and that the price of oil and the krone will rise soon.
“This is a negative signal,” Torbjørn Kjus, an oil analyst for DNB Markets, told Norwegian Broadcasting (NRK) Sunday night. “But within a few months, the oil price will be back up at a higher level than it was before the weekend.”
Oil prices had moved up last week and the krone strengthened, partly because of signs of reduced oil production and partly because of speculation that OPEC would move to effectively curtail production as well. NRK reported that OPEC members Russia, Saudi Arabia, Venezuela and Qatar had all hoped to strike an agreement to freeze production back at January levels.
Iran, however, doesn’t want to freeze production after only recently cranking up again as a result of the nuclear agreement that led to the removal of sanctions against the country. It thus withdrew from the meeting after refusing to go along with the other OPEC members. Limiting production, Iran reasoned, would be tantamount to putting new sanctions on itself.
The price of oil immediately dipped on news of the disagreement within OPEC, and the krone fell as well. After trading as low as NOK 8 against the US dollar last week, it was costing more than NOK 8.3 to buy a dollar Sunday night. The krone was expected to weaken again as oil prices fell, but it was trading at around NOK 8.25 on Monday even though oil prices were down as much as 10 percent.
Kjus of DNB Markets maintains that the setback is temporary. It got the week off to a bad start, however, and he conceded that “some players are disappointed” and will sell off contracts, driving the price of oil back down.
“That will yield a short-term downturn,” he said, predicting that a barrel of Norway’s North Sea crude could fall as much as USD 5 this week. “But I would look at that as an opportunity to buy, because within three to four months, the oil price will be higher.”