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Crude falls 68 cents to $37.57 a barrel
Reuters News Service

NEW YORK -- Oil prices slid today as the U.S. government reported a larger-than-expected rise in crude stocks, strengthening signals that higher OPEC production was replenishing world supplies.

Downward pressure also came from Iraq's resumption of crude flows from its northern oil fields, boosting efforts to overcome sabotage attacks that have shackled the country's exports.

U.S. light crude (CLQ4) for August dropped 68 cents to settle at $37.57 a barrel and Brent crude (LCOc1) in London fell 58 cents to end at $35.03.

Prices tumbled after the U.S. federal Energy Information Administration (EIA) reported that crude oil stocks rose by 2.5 million barrels last week to 305.4 million, the highest level in nearly two years.

Fuel stocks in the United States have been rising in recent weeks, helping to pull crude prices down from early June's 21-year highs above $42 a barrel.

OPEC producers, led by top world exporter Saudi Arabia, have raised output to try to cool prices and make up for repeated disruption to Iraqi supplies.

"Overall, it's good news that crude stocks are building which means we are beginning to see benefits of increased world oil production," said Phil Flynn, market analyst at Alaron Trading in Chicago.

A gradual recovery in Iraqi supplies -- at a complete standstill for six days until Monday because of sabotage -- also weighed on prices.

Iraq restarted exports from its northern Kirkuk field to Turkey's Mediterranean port at a rate of 200,000 barrels per day (bpd) after repairing an export pipeline that was attacked three weeks ago.

Persistent sabotage at Iraq's oil export facilities have held Iraq's oil exports below its pre-war export capacity of 2.2 million bpd.

Crude loadings from southern terminals were flowing at about 1 million bpd, barely half of the 1.8 million bpd exported before the attacks.

Iraq's export problems have strained the world oil supply system, leaving OPEC producers pumping close to full capacity to meet strong demand growth.

Traders kept a close eye on Norway, where oil workers pledged to widen a strike and shut in around a quarter of output from the world's No. 3 crude exporter.

Norway's striking OFS oil union said on Wednesday it would extend a strike at the weekend to halt about 715,000 bpd of Norway's 3 million bpd output.

The six-day stoppage has already cut 375,000 bpd of Norwegian supply, and the shortfall will deepen to 455,000 bpd overnight with the planned closure of an Exxon Mobil field.

Norway's government said it had no plans to intervene to halt the strike, which is over pension rights and demands for tighter restrictions on temporary labor.

Oslo has often invoked emergency laws to order workers back to their jobs when a large part of output is under threat.

Prices rose on Tuesday when ConocoPhillips (COP.N) refinery in Lake Charles, Louisiana, was forced to delay the restart of a shut gasoline-making unit.

The shutdown reignited fears that U.S. gasoline supplies could run tight in the early days of the summer vacation driving season.

The EIA reported that gasoline stocks fell by 800,000 barrels last week to 205.1 million, and are 9 million barrels below the five-year average.

"We need to be building gasoline stocks a bit more than we have been," said analyst Jim Ritterbusch of Ritterbusch and Associates in Chicago.

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June 23, 2004, 9:50AM


Norwegian oil workers threaten to escalate strike
Associated Press

OSLO, Norway -- Oil workers threatened to expand a strike by setting a midnight deadline for shutting down another offshore platform today, while employers considered retaliating with a crippling lockout on all platforms.

A lockout could shut down virtually all petroleum production from the world's third largest oil exporter.

However, in the past, the government has quickly ordered strikers back to work when a conflict disables the 3 million barrel per day oil production that is crucial to the economy of this Nordic country.

The strike comes amid high oil prices due partly to short supplies. Only Saudi Arabia and Russia export more oil than Norway. Oil prices edged higher today as traders await the outcome of the conflict.

Terje Nustad, leader of the striking Federation of Norwegian Oil Workers, said the strike would be expanded beginning midnight Wednesday unless a settlement was reached.

The union ordered 207 workers to strike this past Friday after state-led mediation failed in a dispute over pensions and job security. That has reduced Norwegian oil production by about 375,000 barrels per day.

Another 16 union members were to join the strike at midnight Wednesday, shutting down another platform and bringing total lost production to 455,000 barrels per day, or about 15 percent of Norway's production.

A union statement said 97 more workers at two offshore units would be ordered to strike at midnight Sunday, which would cut oil production by another 260,000 barrels per day.

It said the expanded strike would target the Heimdal field, operated by Norsk Hydro ASA, and the production ship Norne, operated by Statoil ASA.

The strike has already hit fields operated by Statoil, ConocoPhilips and Exxon Mobil.

Tom Gedero, of the Norwegian Oil Industry Association, said oil companies were considering whether to respond with a lockout at platforms not affected by the strike, possibly shutting down all production.

"The situation is serious and it is getting even more serious" because of the union's decision to escalate, Gedero told Dow Jones Newswires.

In a similar strike in 2000, the government ordered binding arbitration, forcing strikers back to work when the oil association announced plans for a lockout.

Labor and Social Affairs Minister Dagfinn Hoeybraaten, who could order binding arbitration, said it was too early and the conflict was still too limited to take such a step.

"It is worrisome that the conflict is being stepped up," he said on the state radio network NRK. "The authorities are following the conflict on the North Sea oil platforms continuously."

Oil prices were higher. The August contract for light sweet crude was up 8 cents at $38.33 a barrel in morning trading in New York. Brent crude oil for August delivery was up 12 cents at $35.73 per barrel in afternoon trading in London.

Oeyind Munthe-Kaas, of Norwegian Oil Trading, said prices had not increased more because the market is awaiting the outcome of the conflict.

"Few want to buy at that price and then risk a settlement" that could cause prices to fall, the trader said.

He also said that since the new cuts don't reach full force until Sunday, others are waiting to see if there is a settlement or if the government orders binding arbitration in the meantime.

Munthe-Kaas said if the conflict causes cuts that are over about 1 million barrels per day, then a back to work order would be likely