Oil Rises First Time in Three Days on Norwegian Strike
Oil rose for the first time in three days as a labor strike threatened to halt all offshore oil and gas production in Norway, Western Europe’s biggest exporter.
Futures climbed 1.8 percent as the shutdown was set to start at midnight local time unless unions and employers resolve a two-week-old strike. As much as 2 million barrels a day of output may be lost from the continental shelf, according to data from the Norwegian Petroleum Directorate. Oil’s gain followed a 3.2 percent decline July 6.
“We are getting some positive sentiment from the idea that Norwegian oil might be taken off the market tomorrow,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We are rebounding from Friday’s big drop.”
Oil for August delivery rose $1.54 to settle at $85.99 a barrel on the New York Mercantile Exchange. Prices are down 13 percent this year. Futures fell $2.77 on July 6 after a report showed U.S. employers hired fewer workers than forecast in June.
Brent crude for August settlement gained $2.13, or 2.2 percent, to $100.32 a barrel on the London-based ICE Futures Europe exchange.
Norway produced 2.04 million barrels a day of oil in 2011, about 2.4 percent of total world output, according to the BP Statistical Review of World Energy.
“Generally, Norwegian strikes don’t last very long but that’s given a little bullish impetus to the market,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Workers will be locked out of oil platforms if no agreement is reached by midnight, Bengt Eidem, a spokesman for the association, said today by telephone as a dispute over pensions entered its 16th day. There has been no contact since yesterday and no further discussions are planned, he said.
“The situation is, of course, very serious and we hope that the strike will be over as soon as possible,” Eidem said.
Statoil, Norway’s biggest energy company, said its shortfall in output will be about 1.2 million barrels of oil equivalent a day.
Norway’s government is “assessing and monitoring” the strike, Morten Dagre, a senior adviser at the Oslo-based Labor Ministry, said by phone today.
Strait of Hormuz
Oil also increased as some Iranian lawmakers called for tariffs on ships sailing through the Strait of Hormuz, a transit point for about 20 percent of the world’s traded oil, according to a Tehran-based newspaper.
Iran fired several missiles during a three-day military exercise last week and threatened to block the strait in response to a European Union-imposed embargo on Iranian oil that took effect on July 1.
Prices pared gains near the close of floor trading after Reuters reported that Iranian Foreign Minister Ali Akbar Salehi said the country is ready to negotiate halting 20 percent uranium enrichment.
An aide to Catherine Ashton, the EU’s foreign policy chief, will meet a top Iranian official on July 24 in an effort to advance international talks over Iran’s nuclear program, the EU said said in an e-mailed statement from Brussels.
“We’ve got news still developing about a potential shortfall overseas,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “Iran and the strike are two things on the minds of all traders.”
Oil futures have tumbled 22 percent since reaching a 52- week high of $110.55 a barrel in intraday trading on March 1.
The recent slide in crude prices is unwarranted and has been caused by countries pumping more oil than the market needs, Hussain al-Shahristani, Iraq’s deputy prime minister for energy affairs, said in remarks aired in an interview yesterday on Iraq’s Al Najaf television.
OPEC, which supplies about 40 percent of global crude, should adhere to its output target of 30 million barrels a day, Shahristani said. Members of the Organization of Petroleum Exporting Countries are pumping about 1.5 million barrels a day in excess of the limit, he said. The 12-member group produced 31.6 million barrels of oil in June, according to Bloomberg estimates.
Electronic trading volume on the Nymex was 422,789 contracts as of 5:08 p.m. in New York. Volume totaled 525,487 contracts July 6, 7.2 percent below the three-month average. Open interest was 1.42 million.
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