Contract Customers Will Pay According to Spot Market : Norway to Let Price of Its Oil Float
Norway’s government-owned oil monopoly, Statoil, said Monday that it is negotiating “spot-market-related” prices for oil with its contract customers and does not know whether it will return to an official price system this winter.
The announcement of the further move away from fixed prices and towards open-market levels had been widely anticipated in oil markets for weeks as the world oil price situation has deteriorated.
Meanwhile, Standard Oil Co. (Indiana) became the latest big oil company to reduce the price it is willing to pay for the top grade of oil produced in the United States, cutting its price on West Texas Intermediate crude to ‘$28 a barrel from $29. The cut matched similar moves last week by Texaco Inc., Chevron Corp. and Chevron’s Gulf Corp. unit.
But oil prices rose in the open market and in commodity markets in response to colder weather in the United States and Europe, which was expected to increase demand for oil.
Willy Olsen, a Statoil spokesman, said the new prices would be negotiated retroactively for the months of December and January and might vary from customer to customer. He added that the prices would not be made pubic.
Brent blend oil from the North Sea was quoted Monday at $27.10 a barrel for February delivery in the spot, or non-contract, market, up 15 cents from Friday but $1.95 below the last official price posted by Statoil, $29.05.
An even wider margin existed earlier this month, when Brent oil fell as low as $26.10.
“You just can’t use those official prices and expect anyone to buy,” said an executive of an international oil company in the United States who spoke only on condition that he not be identified.
The secrecy surrounding the new prices appears to be an attempt to keep Norway “off the hook for being blamed for cutting the price too much,” said Dillard Spriggs, president of Petroleum Analysis Ltd., a consulting firm in New York.
Several ministers of the Organization of Petroleum Exporting Countries have repeatedly threatened a price war if non-member competitors, such as Norway, initiated another round of price cutting.
OPEC, which meets again in Geneva on Jan. 28, has been trying to prop up prices by reducing production.
“What the market is doing now is looking for what the British National Oil Corp. does,” Spriggs said.
In October, price cuts by Norway were followed by Britain, prodding OPEC-member Nigeria to break ranks with the cartel and cut its prices unilaterally.
Uncertainties about the oil market and OPEC’s response to falling prices had kept both Statoil and British National Oil from setting official prices for December or January.
A British National spokesman said the corporation’s position on a new oil price was still under review and that no deadline had been set on making a decision. British National’s last official price for Brent oil was $28.65 a barrel.
With colder weather setting in, demand for oil should be expected to improve and spot prices might be higher the time OPEC meets again, said Eugene Nowak, an oil industry analyst at the New York investment firm of Dean Witter Reynolds Inc.
“We may not have a serious attack on the price structure right now,” Nowak said.
