Oil prices increased due to escalating concerns over potential supply shortages, with Brent crude leading the way as hundreds of oil workers in Norway were set to strike later in the day. The company added 55 cents, or 0.7%, to $78.62 per barrel by 0638 GMT, following a 1.2-percent climb on Monday.
Hundreds of workers on Norwegian oil and gas offshore rigs have gone into strike after rejecting a proposed wage deal – a move that will most likely affect the production of at least one field, Shell’s Knarr. Additionally, this could all to disruptions in other oil producers amid tensions in the Middle East.
The US has announced that it plans to reduce oil exports from Iran, the world’s fifth biggest producer, to zero by November; meaning that other big producers are obliged to pump more. Saudi Arabia, fellow members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, agreed last month to increase output to dampen price gains and offset global production losses in countries such as Libya.
The concern now is that is the Saudis offset the losses from Iran, then that will use up global spare capacity and leave markets more vulnerable to further or unexpected production declines,
“The bottom line becomes the available spare capacity within OPEC … and the markets have started to focus on that,” said Victor Shum, vice-president for energy at IHS markets in Singapore. “It is likely that concern will support prices all through the summer, while demand continues to be strong during the summer peak.”
For example, the head of the National Oil Corporation announced that Libya’s national oil production fell to 527,000 barrels per day from a high of 1.28 million bpd in February, following recent oil port closures. In Canada, an outage at the 360,000-barrel per day Syncrude oil sands facility reduced flows into Cushing, Oklahoma, the delivery point for U.S. futures.