OSLO (Reuters) - Norway’s oil companies have deepened cuts to their 2016 investment plans, the latest survey by Statistics Norway showed on Wednesday, weakening the crown and heightening expectations of a rate cut by the central bank next month.
Norway’s leading industry has hit the brakes due to a 70-percent drop in the price of Brent crude since mid-2014 that has brought the Norwegian economy to a standstill.
The country’s oil companies now plan to invest 163.9 billion crowns ($18.89 billion) this year, against the 171 billion crowns they expected to invest when surveyed in November by Statistics Norway.
“We expected an adjustment downwards, but not as big as this. It is significantly weaker than what (the central) Norges Bank has expected,” Handelsbanken chief economist Kari Due-Andresen said.
“That means the activity in the Norwegian economy will be weaker than they have estimated ... This confirms our expectations that there will be a rate cut in March. We believe Norges Bank will start to guide rates towards zero,” Due-Andresen said.
The key policy rate is currently 0.75 percent. The next rate decision will be announced on March 17.
The oil sector is planning to slash investments by 13 percent in 2016 against 2015, while overall investments by Norwegian firms were expected to fall by nine percent, the survey showed.
“The fall in total investments is moderated by higher expected investments within electricity supply and manufacturing investments,” Statistic Norway said.
The crown had weakened to 9.55 by 0955 GMT against the euro EURNOK= from 9.46 just ahead of the data.
Of particular concern to Norwegian authorities will be cuts to investment in exploration for oil and gas.
Companies are planning to spend 16 billion crowns in exploration this year, down from the 21.5 billion they had expected in November. That would mark a 44-percent drop on the 28.7 billion crowns they spent in 2015.
($1 = 8.6872 Norwegian crowns)
Reporting by Terje Solsvik, Ole Petter Skonnord, Joachim Dagenborg and Henrik Stolen; writing by Gwladys Fouche; editing by Jason Neely