Statoil’s share price jumped more than 5 percent and the main index of the Oslo Stock Exchange was up nearly 2 percent on Thursday, after members of the OPEC oil cartel agreed to cut production in November. That sent oil prices up, which is always good news for the Norwegian economy.
Uncertainty over long-term effects of the OPEC deal remained, but there was some immediate relief in the Norway’s biggest industry, oil and offshore. Newspaper Dagens Næringsliv (DN) was reporting how share prices traded in Oslo jumped within minutes after the exchange opened, with the index rising 1.9 percent to just over 620. Statoil shares were up 5.4 percent, to NOK 132.10.
The price of a barrel of North Sea crude jumped 6 percent during the night, to around USD 49. Norwegian-controlled oil rig company Seadrill spiked 19.7 in trading in the US and shot up 18.4 percent (to NOK 18.21) in Oslo when trading opened.
The value of Norway’s currency, the krone, was also expected to rise but there was no immediate or dramatic increase. The krone strengthened somewhat last week after Norway’s central bank opted against cutting interest rates and indicated rates would remain at around 0.5 percent for quite awhile. After trading at around NOK 8.30 to the US dollar, it was costing around NOK 8.15 to buy a dollar earlier this week. By mid-morning Thursday, many hours after the OPEC agreement to cut its oil supply to boost demand and prices, a dollar cost NOK 8.05.
Analysts were quick to note that uncertainty continues to plague the oil markets. They warned against too much investor optimism after Reuters reported Wednesday night that OPEC would cut its own production by up to 750,000 barrels a day. “It’s a surprise that they managed to do this,” exclaimed Thina Saltvedt, senior oil analyst at Nordea Markets, to DN. “This will restore some balance in the oil market and that’s what the market has been waiting for.”
Saltvedt still thinks, however, that the production cut isn’t large enough to actually “re-balance” the market, between costs and revenues, and she doesn’t think oil prices will really take off. She thinks there’s still too much oil in the market to push prices much higher.
“It will take a cut of a million barrels to really reduce the enormous amounts of oil in storage,” Saltvedt told DN. “One thing is to balance supply and demand, but there’s been an extreme build-up of oil in storage.”
Thorbjørn Kjus, an oil analyst at Norway’s biggest bank, DNB, has also spoken of “extreme uncertainty” in the markets, noting how Iran has increased production since the last OPEC meeting and that both Iran and Saudi Arabia are unpredictable arch-rivals. Other major banks and investors called OPEC’s agreement “unclear” and “vague,” with DN reporting that investment bank Goldman Sachs was predicting oil prices will fall again in the fourth quarter.