UPDATED: Oil prices rose sharply on Wednesday, and the value of Norway’s currency, the krone, immediately jumped as well after the oil cartel OPEC reportedly agreed to cut oil production. Norway’s state statistics bureau SSB now thinks the oil industry downturn is about to turn around and that economic growth will pick up.
With oil supply due to fall, oil and currency traders sent prices up. International news bureaus were reporting that OPEC ministers meeting in Vienna had agreed to collectively cut production by around 1.2 million barrels. It would amount to the first production cut in eight years. With less oil due on the market, prices jumped quickly.
After trading as low as USD 44 a barrel just a few days ago, oil was up to USD 51 by late afternoon. The value of the krone rose accordingly. While it cost just over NOK 8.60 to buy one US dollar earlier this week, the price was down to just over NOK 8.40 by midday on Wednesday. The dollar recovered, though, putting the krone at NOK 8.51 just after 4pm. On Thursday, the krone/dollar exchange rate was back at NOK 8.46 after the price of a barrel of Norway’s North Sea crude oil hit USD 52.56 at midday.
Oslo-based oil analyst Thina Saltvedt of Nordea had earlier told state broadcaster NRK that the OPEC meeting would likely mean a lot for oil prices in the weeks and months ahead. Like most all other oil-producing countries, the steep dive in oil prices since 2014 has hurt the economies of countries from Saudi Arabia to Russia and Venezuela. Supply, meanwhile, has been boosted by Iran’s return to the market following its nuclear agreement and the rising production of shale oil in the US, while demand for fossil fuels has continued to fall.
SSB (Statistics Norway) later released a report showing how its economists see brighter days ahead for the Norwegian economy. They predict an end to the oil industry downturn fairly soon, think economic growth in Norway will rise and that Norway’s unemployment rate will decline to 4.3 percent in 2019.
SSB also cited a “reduced decline” in investments in the petroleum industry and somewhat higher growth in exports, mainland business investment and consumption. Even though oil investment was lower this year than previously warned, “we assume the decline will be less steep in 2017,” wrote SSB, predicting that oil prices would stabilize around USD 53 a barrel “before gradually rising to USD 60 by the end of 2019. To read the full report from SSB, click here (external link).