Picture: REUTERS
Picture: REUTERS

Tokyo/London — Oil prices rose more than $1 a barrel on Tuesday due to growing supply outages, with Norway shutting one oil field as hundreds of workers began a strike and Libya saying its production more than halved in recent months.

The disruptions add to supply worries around the world. Venezuela’s production has collapsed due to a lack of investment and Iranian exports have suffered due to US sanctions. Oil cartel Opec has little capacity to fill the gap as demand for oil quickens.

Benchmark Brent oil futures rose by 96c, or 1.2%, to $79.03 a barrel by 10.58am GMT. They earlier hit an intra-day high of $79.29. Brent gained 1.2% on Monday. US light crude futures were up 38c, or 0.5%, at $74.23.

Mounting supply concerns could push Brent above $85 a barrel, MUFG Bank said in a note. "Renewed geopolitical supply-side disruptions stemming from Canada, Iran, Libya, Venezuela and the US raise the likelihood of oil trade interruptions and, with it, upside risks to oil prices in the near term."

Hundreds of workers on Norwegian offshore oil and gas rigs went on strike on Tuesday after rejecting a proposed wage deal, leading to the shutdown of one Shell-operated oil field. This potentially adds to disruptions in other oil producers amid tensions in the Middle East.

Libya’s national oil production fell to 527,000 barrels per day (bpd) from a high of 1.28-million bpd in February following recent oil port closures, National Oil said on Monday.

The US says it wants to reduce oil exports from Iran, the world’s fifth-biggest producer, to zero by November, which would oblige other big producers to pump more.

Last month, Saudi Arabia, fellow members of Opec and its allies, including Russia, agreed to increase output to dampen price gains and offset global production losses. The market has grown concerned that if the Saudis offset the losses from Iran, the move will use up global spare capacity and leave markets more vulnerable to further or unexpected production declines.

"The bottom line becomes the available spare capacity within Opec ... and the markets have started to focus on that," said Victor Shum, vice-president for energy at IHS markets in Singapore.

Money managers raised their bullish bets on US crude in the week to July 3, the US Commodity Futures Trading Commission said on Monday.