Norway’s crude oil exports down to 1.2 million b/d in September

Significance

Norway's crude oil exports dropped to 1.2 million b/d in September, down from 1.48 million b/d in August. An escalating workers' strike since 30 September has shut four of Equinor's oil and gas fields, and two more operated by Neptune.

Implications

Most losses caused by the recent strike refer to natural gas, which accounts for almost 60% of the total cuts. The combined crude oil output from the six fields shut on Monday stands below 80,000 b/d. The impact on crude oil flows from Norway won't be significant, assuming the strike will last less than a month. Production of Johan Sverdrup, its largest producing oilfield, won't be affected by the strike, according to Equinor.

Outlook

After agreeing to cut its production by 250,000 b/d in June and maintain cuts of 134,000 b/d until the end of the year, total production of Norway is estimated to be down around 300,000 b/d in December 2020, than originally planned. The upper limit by the end of the year stands at 1.725 million b/d.

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An escalating workers' strike in Norway has shut four of Equinor's oil and gas fields, and two more operated by Neptune. Oil prices responded positively as the strike could reduce the country's production capacity by just over 330,000 b/d. Production of Johan Sverdrup, its largest producing oilfield, won't be affected by the strike, according to Equinor. The dispute began in late September.

Norway's output typically stands close to four million b/d, with almost half in the form of crude and other liquids and half from natural gas. It is not clear when the issue could be resolved, with officials of Norwegian Oil and Gas Association stating, "there is no solution in sight". The strike has hit Equinor's Gudrun, Gina Krog and Kvitebjoern fields. Most losses refer to natural gas, which accounts for almost 60% of the total cuts. The combined crude oil output from the six fields shut on Monday stands below 80,000 b/d. The impact on crude oil flows from Norway won't be significant, assuming the strike will last less than a month.

Meanwhile, the country's oil exploration has slumped sharply, by around a third, with all major oil and gas companies around the world cutting spending. Several new exploration projects have already been delayed or cancelled. Exploration is rather crucial for Norway's production, with most of the currently operating fields considered rather mature. New discoveries are required to ensure the national oil and gas industry will remain sustainable.

Norway was producing an average of 1.75 million b/d of crude oil, before it decided to support the OPEC+ effort to reduce global output to support oil prices. Norway agreed to cut its production by 250,000 b/d in June and maintain cuts of 134,000 b/d until the end of the year. Moreover, Norway has been delaying the start-up of production of several fields until 2021.

The total Norwegian production in December 2020 is estimated to be down around 300,000 b/d than originally planned. New oilfields originally supposed to start output by late 2020 represent 166,000 b/d. The upper limit by the end of the year stands at 1.725 million b/d.

Norway's crude oil exports dropped to 1.2 million b/d in September, down from 1.48 million b/d in August. This has been the lowest so far this year, according to IHS Markit Commodities at Sea.

Focusing on crude oil tanker rates in the North Sea, the last couple of weeks have been rather challenging for shipowners. Performance continues to disappoint, as the few fresh cargoes added recently haven't proved enough to improve market's sentiment. October stems look weak to improve the terms for shipowners, with limited if any optimism for November as well. The path ahead looks both difficult and long for tankers in the region. VLCC levels have been under more pressure, with more units made available after ballasting West. The last fixture stood just over USD 4.25 million from North Sea to China.

Crude oil shipments from Norway, in b/d

Source: IHS Markit Commodities at Sea

Crude oil shipments from Teesport, in b/d

Source: IHS Markit Commodities at Sea

Seasonality analysis of crude oil shipments from Norway, in b/d

Source: IHS Markit Commodities at Sea

Norwegian crude oil grades - Average exports in last year, in b/d

Source: IHS Markit Commodities at Sea

Crude oil shipments from Norway by major port, in '000 b/d

Source: IHS Markit Commodities at Sea

Crude oil shipments from Norway by top seven destinations, in '000 b/d

Source: IHS Markit Commodities at Sea

Crude oil tankers positioned near Norway

Source: IHS Markit Commodities at Sea

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Posted 07 October 2020 by Fotios Katsoulas, Associate Director, Lead Analyst Tanker Shipping & Alternative Fuels, S&P Global Commodity Insights