Oil Price Fundamental Daily Forecast – Imminent Norwegian Oil Workers Strike Driving Prices Higher

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher early Tuesday. While the U.S. futures contract is only edging higher, the Brent futures contract is surging due to rising supply concerns fueled by a potential wildcat strike by hundreds of oil workers in Norway.

At 0817 GMT, August WTI crude oil is trading $74.28, up $0.43 or +0.60% and September Brent crude oil is up $0.81 or +1.04% at $78.89.

According to reports, hundreds of workers on Norwegian oil and gas offshore rigs are due to strike on Tuesday after rejecting a proposed wage deal, a move which will likely affect the production of at least one field, Shell’s Knarr.

A prolonged strike at this time when there is little wiggle room for another reduction in supply could launch another leg higher on the daily charts which have been range bound for about a week.

Supply is a major concern at this time due to looming sanctions on Iran, economic turmoil in Venezuela, and production losses in Libya and Canada.

The U.S. is currently pushing to reduce oil exports from Iran to zero. Prices have been underpinned by this event because there is uncertainty over whether other producing nations will be able to overcome the shortfall. While Saudi Arabia and Russia have pledged to increase production, it may not be enough to offset the lost production enough to dampen prices.

The U.S., Saudi Arabia and Russia all fear the start of a potential global economic slowdown if price rise too high. This could then cause demand to fall. This could then drive prices lower. Increased volatility is exactly what these major producers want to avoid.

The Saudis could continue to offset the production losses from Iran, but that will use up global spare capacity and leave markets more vulnerable to further or unexpected production declines.

In other news, Libya’s National Oil Corporation said production fell to 527,000 barrels per day from a high of 1.28 million bpd in February following recent oil port closures.

In Canada, an outage at the 360,000-barrels per day Syncrude oil sands facility has reduced flows into Cushing, Oklahoma, the delivery hug for U.S. futures.

Finally, hedge fund and other money managers raised their bullish bets on U.S. crude in the week to July 3, the U.S. Commodity Trading Commission said on Monday.