Adedapo Adesanya
By Adedapo Adesanya
Brent crude futures gained 82 cents or 0.7 per cent to settle at $114.32 per barrel on Monday as a strike in Norway is expected to disrupt oil and gas output, stimulating further tight supply worries. There was no trade in the West Texas Intermediate (WTI) yesterday due to the Independence Day public holiday in the United States.
Norwegian offshore workers will begin a strike that will reduce oil and gas output, the union leading the industrial action – the Lederne union said.
The strike is expected to reduce oil and gas output by 89,000 barrels of oil equivalent per day, of which gas output makes up 27,500 barrels of oil equivalent per day.
Oil output will be cut by 130,000 barrels per day from Wednesday and this will correspond to around 6.5 per cent of Norway’s production.
The strike, in which workers are demanding wage hikes to compensate for rising inflation, comes amid high oil and gas prices, with supplies of gas to Europe especially tight after Russian export cutbacks.
The Lederne union also said on Monday it would further escalate the industrial action from July 9, taking workers on strike at the Sleipner, Gullfaks A and Gullfaks C platforms.
Analysts note that prices would continue to shoot up if the strike runs throughout the week as a quarter of Norway’s gas output would be shut, which is around 15 per cent of its oil production.
Also helping the market is supply shortfalls from Libya as its National Oil Corporation (NOC) declared force majeure on crude exports from its oil terminals amid continued blockades of production and ports, which have severely crippled the North African country’s oil exports.
The force majeure comes after weeks of protests and closures amid the new rift in Libya’s political class over who should be governing the country.
Despite the supply worries, the outlook for demand is also at the forefront of investor concerns amid a broad tightening in global financial conditions as the US Federal Reserve fights rampant inflation with rapid rate increases.
Interest rate hikes also loom in Australia and in South Korea as authorities try to tamp down red-hot inflation.
In South Korea, inflation in June hit a nearly 24-year high, adding to concerns of slowing economic growth and oil demand.
