Norway takes the sting out of oil prices

Crude oil futures inched lower today, after Norway ordered workers to end a strike that was threatening exports from the world’s third-largest supplier.

But traders were cautious about the release of weekly US crude and oil stockpile data, due tomorrow and likely to show a sixth-straight week of falls in distillate stocks just as the Northern Hemisphere winter begins to bite.

Crude for December delivery was 54.40 dollars per barrel in after-hours electronic trade midmorning in Asia, down 14 cents from its overnight closing. It hit a new record mark of 55.67 dollars yesterday, as reports filtered in of further strike action in Norway.

But prices eased after Oslo ordered striking oil workers back on the job after month-long action, and the Norwegian Shipowners Association withdrew its threat to lock out more oil and gas rig workers.

Norway is the world’s third-largest exporter of crude, with average production of around 3.2 million barrels a day, behind only Saudi Arabia and Russia.

It is also a crucial supplier of distillate fuels, where dwindling stocks in the US, Western Europe and Japan have helped push crude prices above 55 dollars.

Demand for jet fuel – kerosene and additives – also typically rises during the Christmas season because of extra airline flights, adding even more pressure to distillate stocks.

But while crude futures prices are more than 80% higher than a year ago, they would need to reach 80 dollars per barrel in order to surpass the all-time peak, in inflation-adjusted terms, set in February 1981.

Prices have jumped more than 10 dollars in the past month, primarily on the slow pace of recovery in the Gulf of Mexico, where Hurricane Ivan damaged rigs and pipelines from Louisiana to Texas and forced many to close from mid-September.

Analysts and traders warned that the fall may be short-lived and price could rise again quickly when the US Department of Energy data are released tomorrow.

“The market is just in the mood to push prices up higher,” said Simon Wardell, senior energy analyst at World Markets Research Centre. “When it tends to dissipate, you get a fall, but the fall doesn’t quite wipe out the rise.”