Oil Edges Up as Norway Situation Escalates
Oil prices edged up on Thursday as Norwegian employers said they would lock out striking workers next week, threatening to shut off almost all oil and gas output from the world's number three crude exporter.
U.S. light crude rose five cents to $37.62 a barrel. London Brent crude rose 19 cents to $35.22.
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 striking oil workers from offshore platforms from Monday, bringing the six-day-long 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 output.
The strike has shut in about 375,000 barrels per day 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, and that the focus of the fundamental price drivers lies with products.
Data released on Wednesday by the U.S. government Energy Information Administration 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.
"Speculative length continues to evaporate, and indeed the wave of speculative selling is continuing to keep prices down and below what we would see as current fair value.
"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 barrels per day (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.
"It (the increase) should not be delayed because the nominations for August are already done in the beginning of July while we are meeting on July 21. So when we meet, the clock for nominations has already run."