Market watch: Norway will cut production by 150,000 b/d
Following a jump in energy futures prices Friday, the Norwegian government said Monday it would reduce its oil production by 150,000 b/d from Jan. 1 through June 30, the 6-month period advocated by the Organization of Petroleum Exporting Countries.
By the OGJ Online Staff
HOUSTON, Dec. 17 -- Following a jump in energy futures prices Friday, the Norwegian government said Monday it will reduce its oil production by 150,000 b/d from Jan. 1 through June 30, the 6-month period advocated by the Organization of Petroleum Exporting Countries.
That moves OPEC closer to its promised production cut of 1.5 million b/d, provided major non-OPEC producers reduce their output a total 500,000 b/d so as not to take a bigger share of world markets.
Norwegian officials said Monday that their decision to reduce production to 3.02 million b/d from a projected 3.17 million b/d during the first 6 months of 2002 is "unilateral" and not part of any formalized agreement with OPEC or other producers. They said the measures would be suspended unilaterally if:
-- Other countries do not implement their promised production cuts.
-- The reductions do not have the desired effect of stabilizing world oil markets.
-- Their evaluation of the oil market situation deems it necessary.
The reductions will be applied equally to all companies operating on the Norwegian continental shelf, officials said. Nearly all oil producing fields will be subject to a proportional reduction in production, except for the Statfjord and Murchison fields that Norway shares with the UK and the small Varg field that is soon to terminate production.
Norway's proposed cut matches that promised by Russia. Oman has reduced its production by 25,000 b/d, and Mexico promised to curtail its output by 100,000 b/d. With the proposed cuts by Norway and Russia, that totals 425,000 b/d, less than the 500,000 b/d demanded by OPEC members.
There is speculation that OPEC may proceed with at least a prorated reduction or else might trigger a price war to force more compliance from Russia. OPEC members have scheduled an extraordinary meeting Dec. 28 in Cairo to discuss oil market conditions and the reductions pledged by non-OPEC producers.
Friday's rise in energy futures prices apparently was triggered by technical adjustments in markets, but it also may have been aided by the increased possibility of a rollback of world oil production in the New Year.
The January contract for benchmark US light, sweet crudes jumped by $1.11 to $19.23/bbl on the New York Mercantile Exchange. The February position also was up 96¢ to $19.49/bbl.
Home heating oil for January delivery shot up 3.2¢ to 54.25¢/gal on the NYMEX. Unleaded gasoline for the same month rose 2.95¢ to 55.03¢/gal. The January natural gas contract gained 9¢ to $2.85/Mcf.
In London, the January contract for North Sea Brent oil also climbed 58¢ to $18.38/bbl on the International Petroleum Exchange. The January natural gas contract also increased by 11¢ to the equivalent of $4.11/Mcf on the IPE.