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Crude consolidates amid supply disruptions from Norway


Norway workers' strike set to take out almost 500,000 boe/d

Adds to existing supply woes from Russia, Libya

  • Author
  • Andrew Toh
  • Editor
  • Norazlina Jumaat
  • Commodity
  • Natural Gas Oil

Crude oil futures were mostly steady in mid-morning Asian trade July 5, consolidating strong gains from the previous day, as supply disruptions from Norway further added to existing supply woes.

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At 10:52 am Singapore time (0252 GMT), the ICE September Brent futures contract was up 1 cent/b (0.01%) from the previous close at $113.56/b, while the NYMEX August light sweet crude contract rose $1.85/b (1.71%) from the July 1 close at $110.28/b.

US markets were closed for the Independence Day holiday on July 4.

Norway became the latest country to be hit by supply disruptions, with Norwegian offshore workers poised to begin a round of strikes hitting oil and gas production late July 4.

Norwegian offshore managers' union Lederne further expanded July 4 its plans for strikes, with two additional facilities to be shut starting July 9, taking the potential impact to well over 420,000 boe/d unless a pay deal is reached.

The strikes will hit oil and gas flows from significant North Sea fields including Gullfaks, Oseberg and Sleipner. Oseberg is a constituent in the Platts Dated Brent benchmark. Parts of the complex, including the field 'center' and Oseberg C, are not set to be affected.

"Strike action in Norway is set to escalate over the course of this week, which could ultimately see nine oil and gas fields having to shut," ING analyst Warren Patterson said in a July 5 note.

The latest disruptions will add to already strained supply from Russia, Libya, and, until recently, Ecuador. Libya, for one, saw its production fall by more than two-thirds due to a series of blockades and shutdowns at its key oil infrastructure.

Ecuador's oil industry, meanwhile, began reopening oilfields and refining installations July 1 after indigenous leaders ended a two-week protest that left at least eight dead.

The protests saw output from the country drop to less than half of the 520,000 b/d of crude produced in early June, according to the Energy Ministry.

Analysts noted that despite soaring oil prices in recent months, inadequate capital was being redirected to investment for further output.

"High prices are failing to attract additional capital into new supply. Canada's oil industry is redirecting only 40% of record high cash flow into capital investment," ANZ Research analysts Brian Martin and Daniel Hynes said, citing data from Bank of Canada.

Dubai crude swaps and intermonth spreads were higher in mid-morning trade in Asia July 5 from the previous close.

The September Dubai swap was pegged at $102.16/b at 10 am Singapore time (0200 GMT), up $3.48/b (3.53%) from the July 4 Asian market close.

The August-September Dubai swap intermonth spread was pegged at $4.20/b at 10 am, up 10 cents/b over the same period, while the September-October intermonth spread was pegged at $3.07/b, up 23 cents/b.

The September Brent-Dubai EFS was pegged at $12.52/b, up 12 cents/b.