Norway announces 250,000 b/d June oil output cut to shore up market

Norway, Europe's largest oil producer, will cut production by 250,000 b/d in June and by 134,000 b/d in the second half of the year as part of a broad international effort aligned with an OPEC+ agreement, the country's oil and energy ministry said late Wednesday.

The government added that the start-up of production of several fields will be delayed until 2021 in a move to try and stabilize the oil market, which has seen prices plunge to below $20/b amid a coronavirus-induced collapse in demand.

The ministry said in a press release that the basis for the regulation is a reference production of 1,859,000 b/d. Thus, a cut of 250,000 b/d in June 2020 gives an upper limit for oil production on the Norwegian Continental Shelf of 1,609,000 b/d in June. A cut of 134,000 b/d in the second half of 2020 gives an upper limit for oil production on the Norwegian Continental Shelf in the same period of 1,725,000 b/d.

"The cut will include oil fields on the Norwegian Continental Shelf and be fairly distributed between the fields and thereby between companies. It will imply a limitation of production for those oil companies with ownership shares in the relevant oil fields. Gas fields are exempt. Thus, the cut will not affect Norwegian gas production or Norwegian gas exports," Minister of Petroleum and Energy, Tina Bru, said.

Norway is not part of the 23-country OPEC+ alliance, which agreed earlier in April to reduce crude production by 9.7 million b/d in May and June, followed by a 7.7 million b/d drop in the second half of 2020 and a 5.8 million b/d cut from January 2021 to the end of April 2022.

The announcement goes against years of convention in which North Sea producer states have avoided attempts to intervene directly in the market. Norway produced 2.1 million b/d of oil in February, roughly between 2% and 3% of global production, and around two-thirds of North Sea oil production.

"A faster stabilization of the oil market is important for good resource management and for the Norwegian economy," the press release noted.

The North Sea is home to the Dated Brent benchmark, used in oil markets around the world.

Norway is the largest of the North Sea oil producers, and has reversed a decline in output with the launch of production from the Johan Sverdrup field last October. Johan Sverdrup is a heavier grade than conventional North Sea crude and has found favor with Chinese refineries.