A sudden decline in oil prices has raised new fears of more job losses in Norway. The value of Norway’s currency also sank after oil prices fell around 13 percent in the past week, and the Oslo Stock Exchange tumbled, too.
The price of Norway’s North Sea crude oil was trading at just over USD 37 a barrel heading into the weekend, down from nearly USD 43 just a week earlier. That also sent the value of Norway’s krone into decline. By mid-morning on Friday, it cost NOK 9.56 to buy one US dollar, compared to levels just over NOK 9 a few weeks ago.
The Oslo Stock Exchange also fell at the start of trading on Friday, since low oil prices always affect the Norwegian economy negatively. Oil remains Norway’s biggest export product and lower prices mean less money flowing into the state treasury. When the oil price falls below USD 40, even some of Norway’s generally profitable oil fields can start generating losses. Already-troubled state oil company Equinor saw its own shares fall by another 1.5 percent Friday morning.
Corona crisis continues
Analysts and economists blamed the oil price decline largely on the latest effects of the Corona virus. Infection rates have been soaring all over Europe and in the US, forcing political leaders to try to hinder infection by imposing more restrictions. As countries head into lockdown again, demand for fuel, goods and services fell even further.
Industrial and labour leaders in Norway were expressing new concerns over an economic outlook that matched the gloomy weather outdoors. Audun Ingvartsen of the labour organization Lederne worried that low oil prices and rising infection levels in Europe will make oil industry leaders less willing to embark on new projects and investments in new oil fields.
“I’m actually worried that this will result in lower employment levels,” Ingvartsen said on national radio Friday morning. He and others involved in the oil industry told state broadcaster NRK that even though the industry has held up so far, the entire branch is affected when oil prices fall and remain relatively low. “Then we have to cut costs and invest less,” Ellen Bakken, chief economist of the industry’s employers’ organization Norsk olje og gass told NRK.
So much uncertainty
Bakken noted that the Norwegian state’s corona compenation packages have saved many jobs so far, but most new jobs only come when the companies invest in new production.
Many of Norway’s North Sea fields can continue to pump up profits on fields where capital costs have already been covered. The offshore supply side of the industry is hit hardest when prices fall because they no longer get orders for new equipment.
Others linked this week’s bad economic news to uncertainty over the outcome of the US presidential election, while Libya surprised the market by increasing oil production this fall. That added more supply when demand is low, noted Bjarne Schieldrop, chief strategist at SEB.