Norway cuts oil price forecasts for 2014 and 2015

Norway’s government is cutting its projections for oil prices by 4 percent for next year and 11 percent for 2015, reflecting higher supply and lower demand from the world’s two biggest economies, its prime minister said late on Thursday 22. The Nordic country is the world’s seventh-largest oil exporter. It can use up to 4 percent of its oil and gas revenues in its national budget, so it runs oil price projections to establish how much money it can count on.

The government now expects the average per barrel price for oil to fall to 600 crowns ($98.4) in 2014 from its earlier view of 625 crowns. It expects prices to drop further to 535 crowns in 2015. « There is growing uncertainty about oil prices. There is great uncertainty because the United States produce more oil… In addition, China is buying less than before, » Prime Minister Jens Stoltenberg told public broadcaster NRK. « We must be prepared for more falls in oil prices, » he said during a break in negotiations for the 2014 budget.

Norway runs huge budget surpluses thanks to lucrative oil revenues but stashes most of that money away in a $750 billion wealth fund, spending no more than 4 percent of the fund each year on a well developed public sector. Actual spending as a percentage of the oil money has fallen for the past two years and Stoltenberg said his budget, which will be presented after parliamentary elections but before the new government takes over, would anticipate oil spending at barely 3 percent, down from 3.3 percent this year. Norwegians go to the polls on September 9.

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