This could send crude up to whatever price it takes to immediately reduce world consumption by the amount of the cutbacks.
In addition to the additional anticipated Iranian cutbacks.
Releasing strategic reserves could contain prices until production resumed.
By Vegard Botterli and Nerijus Adomaitis
July 5 (Reuters) — Norway’s oil industry moved to lock out all offshore workers on the Norwegian continental shelf on Thursday, aiming to get the government involved and put an end to a near two-week strike that has hit crude exports and helped push up prices.
While a lockout would mean a complete shutdown of oil and gas production in Norway, the world’s eighth-biggest crude exporter, analysts expected the government to intervene, end the strike and prevent a full closure.
“The conflict is deadlocked, and the demands are unreasonable … Unfortunately, we see no other course than to notify a lockout,” the Norwegian oil industry association (OLF) said in a statement.
Some 6,515 workers covered by offshore pay agreements will be locked out from their workplaces with effect from July 10.
The strike, which began June 24, has already slowed crude exports, cut Norway’s oil production by around 13 percent and its gas output by around 4 percent. News of the lockout sent Brent crude futures up to as high as $102.34 a barrel. They were trading at $101.03 at 1458 GMT.
“The likelihood is that the strike will end sooner than expected,” Commerzbank analyst Carsten Fritsch said.
State-controlled Statoil said the lockout would cause a production shortfall for the company of around 1.2 million barrels of oil equivalent (boe) per day and 520 million Norwegian crowns ($86.6 million) in lost revenues per day.
The Norwegian government declined to say whether it would intervene but called the lockout legitimate.
“A lockout is still a part of the legal strike. We are continuing to follow the situation closely,” Gro Oerset, senior adviser at the labour ministry, told Reuters.
Several North Sea oil traders on Thursday were in agreement in expecting the strike to end soon.
“It seems like Statoil is trying to get the government to settle it,” said one.
The government has the authority to force an end to strikes if it believes that safety is being compromised or vital national interests could be harmed and has done so in the past to protect Norway’s image as a reliable energy exporter.
Analysts expect the government to intervene. In 2004, it intervened one day after the oil industry called a lockout.
“A repeat is likely, and if not there will be some SPR (Strategic Petroleum Reserve) release, but the most likely outcome is now a Norway government intervention,” Switzerland-based Petromatrix energy consultancy said in a note.
The Labour-led coalition government has been reluctant to intervene as it faces general elections in a year, and labour unions are important partners.
“I can’t imagine they can accept that the entire production on the Norwegian shelf is shut down for even a minute,” SAFE trade union leader Hilde-Marit Rysst told Reuters.
No new talks are planned between the parties, the state mediator said.
The International Energy Agency said on Thursday it was monitoring the summer oil supply situation very closely.
“We really hope that the sides can reach an agreement by Monday night in order to avoid a prolonged and more widespread outage,” IEA executive Maria van der Hoeven said in a webcast.
The strike initially shut production at the Oseberg and Heidrun fields. Oseberg in particular is significant for oil prices, because it is part of the North Sea Brent benchmark used as the basis for many of the world’s trades.
Oil traders said on Thursday the loading of Oseberg cargoes would be delayed by at least a few days in July, although exact loading dates were unclear because Statoil has not issued a revised July export programme.
An Oseberg cargo scheduled to load on July 1-3 has yet to do so, a source familiar with the matter said. The delay, as reported by Reuters on Monday, was the first sign of an impact of the strike on exports.
An August export plan for Oseberg was expected to be released on Friday, but trade sources said this would not appear until production resumed.
In an apparent expectation of business as usual, however, Statoil on Thursday issued an August loading programme for oil from its Troll field, scheduling a normal export rate. A trading source provided a copy of the loading plan.
Wage talks broke down on June 24 after the OLF refused to negotiate an early retirement scheme for the sector’s 7,000 workers. A second attempt at reaching a deal ended unsuccessfully on Wednesday over pensions.
Hays Oil & Gas said in a recent report Norwegian oil and gas workers were the best paid in the world, followed by Australia, Brunei and the Netherlands. They earn more than twice the average salary of all countries surveyed and more than double workers in Britain.
Harsh working conditions mean that offshore workers, in particular, are among the best paid industrial workers in Norway. Their 12-hour shifts last for two weeks and are followed by four weeks of leave, making for a total of 16 weeks of work a year, excluding overtime.
But the main sticking point for unions is an early retirement age for offshore workers of 62, below the standard 67. Top executives at Statoil are currently eligible for retirement at 62.
The OLF has argued their demands are not in line with government pension reforms.
In May Norway produced 1.6 million barrels of oil per day, and 8.9 billion cubic metres of gas in total.