Øystein Olsen, head of Norway’s central bank, has been reported saying that the price of oil has now fallen below that contained in Norges Bank’s December macroeconomic outlook report.
The comments have been reported by TDN Finans and Dagens Næringsliv following further weakness in global oil prices.
At the time, the bank’s projection was for oil prices to follow futures “which indicate a modest increase in oil prices ahead.”
“We have noted that the oil price has continued to fall, but this is something that we will return to at the next meeting of the monetary policy committee in March,” Olsen is now reported saying.
“The oil price has fallen lower than the assumptions used in our prognosis in December,” he added.
“What happened in the past couple of months, with the oil price and currency rate was surprising for most people,” he said.
According to one chart included in December’s forecast, there are a number of oil industry projects that will not hit break even at the current, lower prices.
Nordea Markets noted in its note for 5 January that the dollar has gained again against the euro, again helping send the dollar price of oil down.
The yield on 10-year Bunds fell to just 49 bps on Friday 2 January, Nordea Markets added. Data on 5 January suggested the spread against the Bund was higher among other Nordic countries than for both France and the Netherlands – indicating a change in market sentiment compared to the last time investors sought out safety on fears of a Grexit, when yields in Nordic market government bonds tended to trend below those of Continental eurozone members not counted among the stricken peripheral countries.
Handelsbanken Capital Markets noted in its note on Norway for 5 January that the volatility in NOK associated with the oil price collapse will be a key factor in whether or not Norges Bank cuts its interest rates in March.
NOK has recently been one of the weakest G10 currencies, Handelsbanken added.