Oil Prices Rise Amid Norway Labor Problems
LONDON – Oil prices edged up on Thursday as Norwegian employers said they would respond to a strike by locking out all workers next week, threatening to shut off almost all oil and gas output.
The move raised the chances of government intervention to end the week-long protest in the world's number three oil exporter.
U.S. light crude rose 14 cents to $37.71 a barrel on the New York Mercantile Exchange (search). London Brent crude rose 23 cents to $35.26.
Analysts said a closer look at U.S. petroleum stock data, which brought New York crude two percent lower on Wednesday, showed no real improvement in tight supplies of refined products, and heralded continued strength in crude prices.
Norwegian employers said on Thursday that they would lock out oil workers from offshore platforms from Monday, bringing the protest to a head.
"The government sees that the situation is serious and will become more serious because of the lockout," Norwegian Prime Minister Kjell Magne Bondevik told reporters. "We are continuously evaluating the situation."
Authorities in Oslo have a history of stepping in to order an end to labor conflicts when all output is threatened.
Unions said they would keep up the strike "as well as possible" and accused employers of gambling that the center-right government would order an end to the strike rather than risk a halt to Norway's 3.0 million barrels per day (bpd) output.
The strike has shut in about 375,000 bpd of crude production, and unions say they plan to escalate this to around 700,000 bpd.
Although an end to the strike would ease some moderate supply fears brought into the market by the strike, analysts and traders say there is no shortage of crude.
Iraq's export outlook weighed on prices: officials told Reuters the country was working to restore by Saturday about 700-800,000 bpd of southern exports shut in by sabotage, adding to about one million bpd already reopened this week.
Foreign oil company officials in Nigeria said the state had removed all output restrictions for June, and asked producers to pump as much as they could.
Analysts said the market was well supplied with crude following increases in OPEC (search) production, and that the focus of fundamental price drivers lay on refined products.
Data released on Wednesday by the Energy Information Administration (search) showed healthy crude stocks: commercial crude inventories rose 2.5 million barrels to 305.4 million barrels last week, the highest they have been in nearly two years.
But the EIA said gasoline stocks shed 800,000 barrels, reviving fears of a supply crunch as the summer demand neared its peak. Heating oil, diesel and jet fuel supply pictures were also still bullish, analysts said.
"The market may be looking to relax, but there really is nothing much to relax about in terms of the recent flow of data," wrote analysts at Barclays Capital.
"With spare capacity so limited, with Iraq such a source of longer-term uncertainty and short-term shocks, with global demand strong, supply weak, and with a host of potential short-term disruptions such as that in progress in Norway, we believe that the speculative bears are now pushing too hard."
OPEC President Purnomo Yusgiantoro said the cartel would proceed with a planned increase of 500,000 bpd to output limits from August 1 as demand rises in summer.
OPEC agreed on June 3 to a two-step rise in official output limits to ease high oil prices, which hit a 21-year peak at $42.45 a barrel for U.S. crude on June 2.
Oil prices have fallen nearly 12 percent since then, triggering talk that OPEC may reverse the decision, or delay the August increase.
Asked to confirm that there would be no change to OPEC's policy, Purnomo, who is also Indonesian oil minister said: "Yes, there's no change. In the summer the need for oil is stronger.