The oil price drops and the krone weakens sharply

The oil price drops and the krone weakens sharply

Japan’s Nikkei fell by 2.7 percent on Friday morning and the Hong Kong stock exchange was down 2.5 percent. The reason is the discovery of a new and more contagious type of corona in South Africa.

The market turmoil is driving up oil prices, which fell sharply by about 2.5 percent on Friday morning to around $80 a barrel. The new virus fear is raising concerns about the outlook for energy demand ahead of next week’s OPEC+ meeting, according to Bloomberg.

The stock market crash and market turmoil are due to the new and more contagious variant of the virus, and the uncertainty surrounding vaccines is working against that. Today everyone’s eyes are on the WHO, says Bjorn Roger Wilhelmsen, chief economist at Nordkinn Asset Management.

Chief Economist Bjørn-Roger Wilhelmsen at Nordkinn Asset Management.

Chief Economist Bjørn-Roger Wilhelmsen at Nordkinn Asset Management. (Photo: Gunnar Lear)

On Friday, the World Health Organization held a crisis meeting regarding the new Corona variant, and there is great tension in the markets regarding their professional advice on the measures that should be implemented.

The big fear in the markets, Wilhelmsen says, is new closures and that the pandemic will last longer. In the short term, he says, new lockdowns could actually inflate the nascent inflation we’re all seeing in many places. During the epidemic, people shifted consumption from services to goods, and production problems and shortages of goods drove prices up. On top of this come the disrupted supply chains, which further contributed to the price pressure.

Wilhelmsen notes that US short-term interest rates did rise significantly last night.

– New alarm bells rings

The new alternative to the Covid virus in South Africa is ringing new alarm bells. I expect OPEC+ to stick with its downsizing strategy, but if the new alternative becomes a major problem in the coming days, it could end up halting monthly increases temporarily, Vandana Hari, founder of energy analysis firm Vanda Insights in Singapore, tells Bloomberg.

OPEC+, which consists of OPEC with Saudi Arabia at the helm and its oil-producing partner mainly Russia, will meet on December 2 to decide what kind of production level they should go to in January. This comes after the United States and some other countries decided to withdraw oil from their strategic reserves to prevent a rise in energy prices.

Bloomberg writes that some delegates from OPEC have indicated that parts of the alliance’s production may be withheld as a result.

– The price of oil is falling amid expectations of a decline in economic activity globally with the closure. Then the demand for oil drops, and so does the krone, says Wilhelmsen of Nordken Asset Management.

Double the strong krone

The Norwegian krone also weakened sharply in the morning. Wilhelmsen says the NOK usually weakens when there is a decrease in risk appetite in the markets, such as in the case of a prolonged pandemic.

One euro moved from the price of 10.05 crowns yesterday to the price of 10.15 crowns today.

The US dollar is now at 9.05 kroner and for the first time over nine dollars since August. This means that we have to go back to November 17 last year to find a day when the krone was completely weak against the dollar.

However, the krone is much stronger than when it fell further in the markets in March of last year. A dollar for longer periods then costs more than ten Norwegian kroner.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.

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Dalila Awolowo

Dalila Awolowo

"Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff."

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