Wage negotiations between two Norwegian oil workers’ trade unions and an employers’ association have fallen through, and hundreds of rig workers are going on strike today, which will immediately disrupt production at the Knarr field, operated by Shell and producing 63,000 bpd of crude, Reuters reports.
Now, 63,000 bpd is not a whole lot of oil, but the disruption has added to a quick decline in Libyan production rates, the Syncrude outage in Canada’s oil sands, and, most of all, growing worry that Saudi Arabia’s spare capacity—and OPEC’s, for that matter—will not be enough to offset the effect of Iranian sanctions on global oil supply.
As a result, Brent has crept up above US$78 a barrel and West Texas Intermediate has breached US$74 a barrel.
Things could have been worse if Norway’s largest oil workers’ union had joined the strikes, which will involve an estimated 670 people initially. However, that union, Industri Energi, inked a deal with employers earlier this year.
The number of workers on strike could swell to 2,250 if the tension between the parties cannot be settled. For now, this seems unlikely. The moderator of the negotiations, Carl Petter Martinsen, said in a statement that “The parties were so far apart from each other there was no point presenting a proposal that could be recommended to both sides.” Related: Iran Sanctions Are Different This Time
Wage talks between trade unions and employers began in March this year. Unlike in the past, this year’s negotiations were centralized rather than done on an industry-by-industry basis, and there was temporarily a danger of as many as 35,000 workers in various industries walking out if the talks had broken down.
The danger was avoided, but only for a while, apparently. The last major oil strike in Norway took place in 2012, which took offline 13 percent of the country’s oil production, pushing prices up to above US$100 a barrel. In that case, the government had to interfere to force an end to the strike.
By Irina Slav for Oilprice.com
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President Trump’s attempts to convince the global oil market that US sanctions could cost Iran 1 million barrels a day (mbd) of its oil exports coupled with western media’s fake news claiming that South Korea, India and Japan have already decided to halt their imports of Iranian crude, are already creating doubts in the global oil market as to whether US sanction will succeed.
In addition to the above, President Trump has single-handedly succeeded in antagonizing the world with his discredited “America first” policy to the extent that the overwhelming nations of the world are now minded to ignore the US call to halt imports of Iranian crude.
The petro-yuan not only has nullified the effectiveness of US sanctions in general but it has also been gaining weight and momentum at the expense of the petrodollar. It is also providing a viable alternative for oil producers threatened with US sanctions to bypass the petrodollar altogether.
The brewing trade war between China and the United States is not about China bending the rules and manipulating the value of its currency to achieve a huge trade surplus with the US. It is about the threat posed by the petro-yuan to the petrodollar which is the core of the US financial system.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London