Oil above $93 on Norway strike, US supply drop

LONDON - Oil gained on Wednesday supported by tighter North Sea oil supply, while strong US data also bolstered the demand outlook, offsetting concern European leaders would fail to solve the region’s debt crisis at a meeting this week.

By (Reuters)

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Published: Wed 27 Jun 2012, 9:22 PM

Last updated: Tue 7 Apr 2015, 11:57 AM

Demand for long-lasting US manufactured goods rebounded more than expected in May and a gauge of business spending plans increased, improving a demand picture that had been dimmed by weak data from Europe.

Brent crude was up 56 cents to $93.58 a barrel by 1452 GMT. US crude was up 88 cents at $80.24.

An oil strike in Norway pushed up Brent prices. The strike has now cut output by 240,000 barrels of oil per day (bpd), higher than previously estimated. Norwegian crude is priced in relation to Brent.

Norway’s government does not plan to intervene to halt the strike and may change its stance should it escalate, labour minister Hanne Bjurstroem said on Wednesday.

Oil remained on an upward track after the US Energy Information Administration said crude oil and distillates stockpiles fell last week, while gasoline rose. Crude stocks fell by 133,000 barrels, less than expected, and distillates by 2.28 million barrels.

German Chancellor Angela Merkel snuffed out the idea of common euro zone bonds, which are favoured by France, Italy and Spain, saying that Europe would not share total debt liability “as long as I live”.

Low expectations for a bold move from a Thursday summit of European leaders to halt contagion from the 30-month long debt crisis kept traders nervous, and many think there is scope for further weakness.

“I think it will retrace back to $90 (per barrel), said Christopher Bellew, at Jefferies Bache.

“As long as Saudi production remains so high, it would take a bigger-than-expected disruption from Iran to push prices high again, with poorer-than-expected data in China and Europe.”

Saudi Arabia is showing no sign of changing its policy of high oil output to support global economic growth, despite a fall in crude prices below $90 for the first time in 18 months last week.

Brent on Tuesday posted its largest daily percentage gain since March 1, settling above $93 for the first time in a week after Norway’s Statoil ASA said it would shut four more oil platforms in the North Sea.

The EIA data on US crude stocks contrasted with the American Petroleum Institute’s (API) report on Tuesday, which showed an unexpected rise of 507,000 barrels last week.

Even after the latest rally, oil is on track to drop more than 20 percent in the second quarter, the largest three-month fall since the financial crisis in 2008, due to demand concerns triggered by economic worries.

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