Norway increases its oil and gas revenue forecast for 2026 to $78 billion

The government of Norway said on Tuesday that it expected the state to earn $72.1 billion ($78.71billion) in revenue this year from oil and gas production. This is up from the initial estimate of $557.4billion, due to the Iran War pushing energy prices higher.

Norway produces approximately 4 million barrels equivalent of oil per day. However, the minority Labour Government said that the windfall revenues from higher prices should go to its sovereign fund, which is already the largest in the world at $2.2 trillion.

Norway, unlike other European countries, has large fiscal surpluses, thanks to the fund. However, it still needs to limit its spending in order to prevent domestic inflation from escalating by stimulating too much demand and raising interest rates.

The Norwegian central bank raised its policy rate last week by 25 basis points, or?4.25%. This was earlier than analysts had anticipated, and was done to combat inflation caused by high energy prices and strong wage growth.

Lowers Economic Forecast

The government estimates that crude oil prices will average $91 a barrel in this year. This is up from $67 per barrel seen in October. Natural gas will also cost $14.0 for?million British Thermal Units (MMBtu), which is up from $10.40 per MMBtu.

The Finance Ministry cut its forecast of economic growth outside the?oil?industry (known as non-oil?GDP) to 1.7% by 2026, from 2.1% in the original budget bill in October. It blamed the weaker outlook for the fallout of the Iran 'war.

Opposition parties, who want to "overrule Labour priorities" are negotiating hard to get a majority in parliament for the budget.

The revised budget shows that cash spending from the fund will be 579.0 billion Norwegian crowns in this year. This is down from the original 584.0 billion crowns planned for last December. Reporting by Terje Solsvik and editing by Gwladys Fauché.

(source: Reuters)