Oil prices hit new highs on Norway strike fears
LONDON (AFP) - Oil prices raced up to new record highs, approaching 56 dollars in New York amid fears a strike could cripple supplies from Norway, the world's third-largest oil exporter.
New York's main contract, light sweet crude for delivery in December, hit a new all-time high of 55.67 dollars a barrel in electronic trading. It later eased back slightly to 55.55 dollars, showing a gain of 38 cents.
The price of Brent North Sea crude oil for delivery in November scaled a new historic peak of 51.90 dollars a barrel in electronic deals. In early deals Brent crude futures were 27 cents higher at 51.49 dollars.
Traders were using the Norwegian strike threat as an excuse to push prices up even though the government was likely to step in to resolve the dispute, said Robert Laughlin, head of energy trading at brokers GNI-Man Financial.
"I do see 60 dollars (as possible for oil prices) because we're going to have a fairly harsh winter and we don't have the refining capacities to go with it," he added.
Prices continued their seemingly relentless record-breaking streak after a Norwegian shipowners association threatened to halt oil shipments in support of industrial action that has weighed on the industry since July.
Norges Rederiforbund, an association that includes companies that serve the oil industry, said it would suspend the activities of 94 of its ships.
"The impact of this secondary lockout, which comes into force from midnight (2200 GMT) Monday, November 8, 2004, will then have immediate effect, and bring the production of oil and gas on the Norwegian shelf to a standstill within a week," the association said in a statement.
However, analysts noted that the Norwegian government has a record of intervening to resolve labour disputes and was unlikely to allow the country's oil production to be paralysed.
"The Norwegian government has a history of using its tool of enforced mediation when labour disputes threaten to close down the production on the Norwegian continental shelf," said oil analyst Anne Gjoen at Alfred Berg ABN Amro in Oslo.
"I see it as very likely that this will happen now, given the huge economic consequences a lockout will have."
The NSA issued its threat in response to a stoppage organised by the Federation of Oil Workers (OFS) that has been running since early July and has cut the country's daily hydrocarbons output by some 55,000 barrels.
OFS officials agreed that forced mediation was a likely outcome.
"We are going to continue the strike," the deputy head of OFS, Bjoern Tjessem, told AFP. But, he added, "the risk that the government may intervene is quite big."
Even before the Norway news oil prices had soared to a series of record highs on worries about low stocks of heating oil, strong demand from China and ongoing supply problems in the Gulf of Mexico and Iraq.
World oil prices have surged by about two-thirds since the start of this year. Adjusted for inflation, however, they remain far below the levels reached in the wake of the 1979 Iranian revolution when prices surged to upwards of 80 dollars a barrel in today's money.
The oil price spike has raised worries about the global economic outlook, leading several Wall Street banks to downgrade their growth forecasts for next year.
But the Organization for Economic Cooperation and Development said high energy costs were having only a modest impact on world economic activity.
"Higher oil prices have less effect on the industrialized economies than they had some decades ago, and the recent hikes have only marginally slowed growth in the major OECD economies," the Paris-based grouping said in a report.