The Norwegian krone has reached a “record weak” level, as global oil prices have been slashed in half since New Year.
Oil prices may plummet further and the oil industry sector is facing a difficult year, Norway’s Jarand Rystad, who is seen as one of the world’s leading oil analysts, has predicted.
On Wednesday, the price of North Sea oil fell by 14 percent to $24.67 per barrel, reaching its nadir since 2003.
Rystad expects the coronavirus pandemic and the “price war” between Saudi Arabia and Russia to replenish supplies, forcing prices down to a level of between $15 and $10 per barrel.
“Then you have to turn off the valve. We may have to pay to get rid of the oil”, Rystad ventured.
However, he also predicted a light at the end of the tunnel.
Rystad’s calculation is that the Norwegian oil industry is facing a tough period until a violent surge in 2022/2023.
Norway is one of the world’s leading exporters of crude oil. The oil and gas sector constitutes around 18 percent of the country’s GDP and wholly 62 percent of Norwegian exports.
The turmoil on the international oil market plunged the already weakened Norwegian krone to new depths. The dollar has appreciated against the krone from NOK 8.76 per dollar around New Year to 11.65 this week, signalling a “record weak” krone. For the sake of comparison, the dollar was worth around NOK 6 between 2009 and 2014.
“It’s about OPEC and Russia announcing increased production. The oil market will be swamped by oil”, Nordea Markets strategist Joachim Bernhardsen told E24, explaining the recent downfall.
The global oil prices have fallen from around $66 around New Year to well below $30 following the OPEC+ failure to agree on production cuts amid global pandemic concerns – the biggest fall since the 1991 Gulf War. This triggered what many see as a price war, as Saudi Arabia, the United Arab Emirates, and Russia all moved to boost their output by several million barrels per day.