The Norwegian Government has decided to make oil production cuts in an attempt to stabilise the oil market faster.

The Government said on Thursday that the coronavirus pandemic and the efforts to contain it in large parts of the world had a substantial impact on economic activity globally and oil demand as well.

The Norwegian authorities believe that oil production cuts will contribute to a faster stabilisation of the oil market compared to letting the rebalancing take place only through the market mechanism.

It is noteworthy that the International Energy Agency’s (IEA) latest estimate from mid-April suggests a fall in demand for oil of around 23 per cent or 23 mbpd in the second quarter.

This large and sudden fall in oil consumption represents an unprecedented event in the oil market. This, together with efforts to contain the pandemic has resulted in a large surplus of oil in the market and large quantities of oil in stock, with prices dropping about 70 per cent since the beginning of 2020.

In turn, many companies took measures to mitigate the effects of the oil price drop by slashing their capital expenditures for the year.

Minister of Petroleum and Energy, Tina Bru, said: “Both producers and consumers benefit from a stable market. We have previously stated that we will consider a cut in Norwegian production if several big producing countries implement significant cuts. The decision by the Norwegian Government to reduce Norwegian oil production has been made on an independent basis and with Norwegian interests at heart”.