Sharp fall in crude oil prices

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The producer price index fell for the first time since February 2018. Higher prices on electricity were offset by a substantial fall in the price of crude oil.

The declining prices on crude oil during this autumn resulted in a relatively low price in November 2018. For the first time in a year the price of Brent Blend fell below 60 USD per barrel, and the observed recovery of prices on crude oil was to a large degree reversed, according to new figures in Producer price index.

Crude oil: mixed predictions, one outcome

An unanticipated surplus in American crude oil inventories was considered one important reason behind the drop in the prices from October to November. However, markets initially anticipated an increase in crude oil prices due to US sanctions on Iran oil exports which took effect early November. The impact of these sanctions was however reduced as some important importers of crude oil were granted exemptions. The 16 per cent decline in the crude oil price from October to November this year differs markedly from the same period in 2017 during which the price on crude oil increased sharply.

Figure 1. Price indices. 2010=100

PPI total Extraction of crude oil
Jan. 2010 91.88 91.1
Feb. 2010 93.78 91.7
Mar. 2010 95.98 98.02
Apr. 2010 99.35 104.43
Mai 2010 98.88 99.08
Jun. 2010 101.08 100.44
Jul. 2010 101.11 99.12
Aug. 2010 101.44 97.88
Sept. 2010 101.11 97.71
Oct. 2010 101.15 100.74
Nov.2010 104.69 105.85
Dec. 2010 109.54 113.92
Jan. 2011 112.26 118.32
Feb. 2011 113.61 124.25
Mar. 2011 116.48 133.38
Apr. 2011 119.22 139.82
May 2011 116.66 132.04
Jun. 2011 115.59 131.3
Jul. 2011 117.41 133.04
Aug. 2011 114.44 125.78
Sept. 2011 116.52 132.56
Oct. 2011 116.63 128.8
Nov.2011 118.22 132.7
Dec. 2011 118.49 131.77
Jan. 2012 121.09 137.5
Feb. 2012 122.31 141.26
Mar. 2012 124.13 148.41
Apr. 2012 122.16 143.23
May 2012 119.54 134.12
Jun. 2012 115.4 119.33
Jul. 2012 116.75 129.49
Aug. 2012 119.46 138.97
Sept. 2012 118.16 133.53
Oct. 2012 118.61 131.6
Nov.2012 118.2 130.09
Dec. 2012 118.17 128.76
Jan. 2013 118.21 130.77
Feb. 2013 118.87 133.74
Mar. 2013 119.94 130.13
Apr. 2013 120.23 123.41
May 2013 117.57 122.97
Jun. 2013 117.41 125.97
Jul. 2013 120.26 135.45
Aug. 2013 121.44 137.95
Sept. 2013 122.01 138.47
Oct. 2013 121.31 134.87
Nov.2013 121.95 121.95
Dec. 2013 123.9 141.08
Jan. 2014 124.43 138.81
Feb. 2014 123.57 139.01
Mar. 2014 120.03 133.62
Apr. 2014 119.43 133.62
May 2014 118.37 135.5
Jun. 2014 118.87 140.32
Jul. 2014 118.23 137.46
Aug. 2014 117.41 131.46
Sept. 2014 117.4 129.07
Oct. 2014 117.17 119.95
Nov.2014 113.93 111.93
Dec. 2014 114.18 93.64
Jan. 2015 108.98 78
Feb. 2015 111.3 92.95
Mar. 2015 112.76 93.95
Apr. 2015 112.78 98.95
May 2015 112.72 102.78
Jun. 2015 113.05 104.84
Jul. 2015 110.45 97.44
Aug. 2015 105.71 81.59
Sept. 2015 105.51 83.92
Oct. 2015 106.12 84.9
Nov.2015 106.57 83.4
Dec. 2015 101.8 70.57
Jan. 2016 97.26 57.89
Feb. 2016 94.7 60.77
Mars.2016 95.9 70.24
Apr. 2016 96.63 73.86
May 2016 99.27 81.64
Jun. 2016 102.08 87
Jul. 2016 102.5 82.13
Aug. 2016 100.69 80.44
Sept. 2016 99.12 81.68
Oct. 2016 101.32 87.32
Nov.2016 103.86 82.02
Dec. 2016 109.19 96.98
Jan. 2017 109.54 97.43
Feb. 2017 112.52 96.31
Mar. 2017 111.35 93.63
Apr. 2017 109.03 95.83
May 2017 108.13 91.29
Jun. 2017 105.37 82.57
Jul. 2017 104.3 83.44
Aug. 2017 104.75 84.94
Sept. 2017 107.75 90.8
Oct. 2017 110.4 95.18
Nov.2017 113.98 106.03
Dec. 2017 117.23 117.23
Jan. 2018 120.89 113.82
Feb. 2018 117.82 105.68
Mar. 2018 118.42 108.31
Apr. 2018 122.33 117.35
May 2018 123.78 130.49
Jun. 2018 126.5 128.11
Jul. 2018 127.85 127.52
Aug. 2018 128.55 128.6
Sept. 2018 130.45 136.46
Oct. 2018 135.2 139.07
Nov.2018 130.97 116.14

Measured in NOK, the price on crude oil fell less because the krone weakened against the USD from October to November. Despite a weaker krone, the Norwegian PPI fell 3.2 per cent from October to November. The Norwegian PPI has not experienced such a monthly decline for about two years. In addition to the fall in the crude oil price, the price on natural gas fell slightly from October to November. During winter, the demand for natural gas from continental Europe usually increases, and this could explain the relatively moderate decrease in prices in an otherwise relatively unstable petroleum market.

Higher electricity prices

The Norwegian Water Resources and Energy Directorate reported increasing prices during November, which is also observed in electricity prices measured in the Norwegian PPI. Electricity prices typically increase during autumn as the season usually brings colder temperatures. However, the price development in 2018 is characterised by unusually high electricity prices during summer followed by declining prices during the autumn. The price increase from October to November was caused by a combination of lower capacity in production of nuclear power in Sweden, persistently low production of Scandinavian wind power, higher price on CO2 quotas and anticipated lower temperatures. The PPI for electricity was about 40 per cent higher compared to November 2017, despite the previous decline in electricity this autumn. With 8.4 per cent higher prices from October to November 2018, electricity prices reduced the overall fall in the PPI. 

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