Oil prices rise on Norway strike

Oil prices rise on Norway strike

Hundreds of workers on Norwegian offshore oil and gas rigs went on strike today after rejecting a proposed wage deal, leading to the shutdown of one Shell-operated field and helping send Brent crude prices higher.

Norway is Western Europe's biggest oil producer and the disruption added to rising global oil supply outages and helped push Brent crude prices up 1.2% to $79.03 per barrel, following a 1.2% climb on Monday amid concerns about global supplies. U.S. light crude futures were up 35 cents, or 0.5%, at $74.20.

Royal Dutch Shell said that due to the strike it was temporarily closing production at its Knarr field, which has a daily output of 23,900 barrels of mostly oil, but also natural gas liquids and natural gas.

The output of Norway's biggest oil producer Equinor, formerly known as Statoil, was not affected by the strike so far, the company said, even though it was shutting down drilling operations at its Snorre B platform.

A state-appointed mediator said talks between two trade unions, Safe and YS, and the Shipowners' Association, representing the rig employers, had failed to reach a deal, Reuters reported.

The Safe union wants pension rights to be the same for everyone regardless of whether an employee is new to a company or has many years of experience. It also wants wages for drilling workers to match those of workers for oil companies, which are higher.

The Norwegian Shipowners' Association said Safe was asking for a 50,000 Norwegian crown ($6,224) salary increase for unskilled workers, equivalent to about 8% of the current wage levels.

Around 670 workers would walk out from Tuesday, with an additional 901 employees joining them from midnight on Sunday if the dispute is not resolved, Safe said in letters to the Shipowners' Association. In total, up to 2,250 workers could join the action, it said.

Talks between the two striking Norwegian unions and rig employers will not resume for a few days, the leader of Safe, Hilde-Marit Rysst, said.

The executive vice-president of NewTech Services, professor of the Gubkin Russian State University of Oil and Gas, Valery Bessel, speaking to Vestnik Kavkaza, noted that such a strong reaction of traders to the Norway strike was due to the general nervous background in the oil market. "Oil production in Norway is insignificant in relation to global production, and such a price jump indicates the industry's fever from constant negative news. What we see is speculative growth, not connected with the determining factors in the development of the oil and gas industry," he stressed.

According to the executive vice-president of NewTech Services, such nervousness of traders plays into Russia's hands. "The main thing is not to relax and not rest on our laurels because of high prices. We also need to be very cautious about local conflicts," he warned.