Two years ago, western Europe’s biggest oil producing nation said no one should count on $100 crude coming back. Now Norway’s changed its tune.
“It’s far from unlikely that we will see $100 again,” Petroleum and Energy Minister Terje Soviknes said in an interview in Oslo on Tuesday.
Thanks to output cuts by OPEC and other producers such as Russia, crude has staged a spectacular recovery from a bruising slump that saw benchmark Brent fall as low as $27 a barrel in January 2016. OPEC and its allies recently concluded they had achieved their goal of re-balancing the market in April.
Based on the cartel’s success, Saudi Arabia and Russia last week signaled a production boost later this year, leading crude to fall back to about $75 a barrel from $80. But that retreat is likely to be temporary, as the global market has yet to feel the full impact of dramatic investment cuts over the past three years on new oil projects, Norway’s minister said.
“It’s likely that we will see higher demand than production because of low investments for a period of time,” he said. “The question is when it will happen.”
Norway’s government raised its own oil-price assumptions in its revised 2018 budget earlier this month to 519 kroner ($62.50) a barrel from 438 kroner. That’s a “very cautious” estimate, Soviknes told a conference in Oslo on Tuesday.
The point made by his predecessor Tord Lien two years ago — that oil companies should keep costs in check and not count on the return of $100 crude to ensure their profits — is still valid, Soviknes said.
“We must at all cost avoid leaning back because things are going a bit better, and end up going into a new cost spiral,” he said.