The Norwegian government has sharply lowered its forecast for crude oil prices and expects the cash flow from its oil and gas industry to decline sharply due to falling global demand.
Norway is the largest producer of oil and gas in Western Europe, accounting for 40 percent of exports and about one-fifth of the government’s oil and gas revenues.
Since the lowest decline of the Brent crude on April 22, oil prices have recovered. Declining production and reopening economies raised the demand for oil.
Norway currently expects its government revenue from the oil industry to be 97.8 billion kroner ($ 9.53 billion) this year. Norway had previously forecast a figure of 245 billion in its October draft budget last year.
The country estimates oil revenues at 116 billion kronor in 2021, up from 287 billion previously.
Norway’s oil revenues are likely to fall due to low oil and gas prices. Meanwhile, temporary tax exemptions have increased the liquidity of oil companies to 100 billion kronor over two years.
The Norwegian Oil and Gas Association has said the government’s move is not enough to stimulate investment in new projects, and the Norwegian parliament needs to do more.
The Norwegian government forecasts oil prices in 2020 at 331 kronor, or $ 32.17 per barrel. This is down from 476 kronor in October last year. The country estimates that oil prices will rise slightly in 2021 to 353 kronor per barrel.
Following the signing of an OPEC+ agreement to reduce production, Norway is decreasing its oil output from June to December. This will affect the country’s income.
Oil prices rose on Tuesday as Saudi Arabia unexpectedly announced further production cuts in June. North Sea oil is currently up 1.4 percent at $ 30 a barrel but is still half the price from the beginning of this year.
Norway lowers its oil production by 250,000 barrels per day
The Norwegian Ministry of Oil and Energy announced that the country would reduce oil production by 250,000 barrels per day in June.
Tina Boro, Norway’s oil minister, stated that the world is facing unprecedented conditions in the oil market. The oil production cut is beneficial for both manufacturers and consumers. The decision has been made independently according to the interests of the country, the minister said.
In addition to reducing production, the country’s oil companies postponed the launching of several new oil projects until next year.
It is the first time Norway has joined a mass production cut agreement since 2002.
In 2002, Norway cut its oil production to 150,000 barrels a day after prices falling below $ 20 a barrel following the September 19 terrorist attacks.