Norway Oil Companies Lower 2017 Spending Plans

Norway's oil companies have lowered their 2017 investment plans, a Statistics Norway survey showed on Wednesday, raising the chances of a central bank interest rate cut in the coming months.

 

Norway's biggest industry has curbed spending in the wake of a more than 50 percent fall in oil prices over the last two years, bringing the economy to a near standstill.

 

The country's oil companies plan to invest 146.6 billion crowns ($17.21 billion) next year, the survey showed, down from 150.5 billion crowns when surveyed in August by Statistics Norway.

 

"The decline is mainly due to lower estimates for exploration and shutdown and removal (of platforms). Exploration wells and removal projects originally planned for 2017 are now postponed," Statistics Norway said in a statement.

 

Plans now point to a 10 percent cut versus 2016, economists at Handelsbanken said, much deeper than the approximately 4 percent cut expected by the Norwegian central bank.

 

"This suggests that the offshore oil sector will continue to drag down Norway's industrial sector and economic activity next year, by maybe more than we thought," Handelsbanken Chief Economist Kari Due-Andresen said.

 

The oil sector accounts for 20 percent of the Nordic country's economy.

 

Due-Andresen expects the central bank to leave its key policy rate unchanged at 0.50 percent on Dec. 15 but she said the bank could cut its rate path, or outlook.

 

Norges Bank has said since September that it expects the key policy rate to stay at 0.50 percent "in the period ahead".

 

Kyrre Aamdal an economist at DNB Markets, agreed that the central bank would likely leave the rate untouched as it worries about overheating in the housing market.

 

However, "the downside risk is high and has increased after the oil investment numbers," Aamdal said.

 

The crown had weakened to 9.0700 against the euro by 0755 GMT from 9.0501 just ahead of the data.

($1 = 8.5179 Norwegian crowns)

(Reporting by Camilla Knudsen and Terje Solsvik; writing by Gwladys Fouche; editing by Jason Neely)