NEW YORK (Reuters) - Oil prices jumped 2 percent on Monday, with Brent futures rising back above $100 a barrel as a strike by workers and a planned lockout by companies threatened to completely shut Norway's crude oil production.
Prices were off session highs in post-settlement trading on news that Iran's foreign minister downplayed in an interview recent threats to shut the Strait of Hormuz and said that Iran is ready to negotiate on uranium enrichment.
Negotiations on Sunday between oil workers and employers over pay and pensions could not resolve the dispute, raising the specter of the first complete shutdown of Norway's oil industry in more than 25 years.
The strike, in its third week, has cut oil output from western Europe's top producer by 13 percent. The government could force an end to the strike but a labor ministry spokesman said on Sunday there were no immediate plans to intervene.
Statoil (STL.OL), Norway's biggest offshore operator, said on Monday the company was preparing to start shutting down production after a midnight deadline (6.00 p.m. EDT).
"Crude futures have climbed to new session highs on worries of a potential shutdown of Norwegian production," said Addison Armstrong, senior director, market research at Tradition Energy.
Brent August crude jumped $2.13 to settle at $100.32 a barrel, having reached $101.06.
U.S. August crude rose $1.54 to settle at $85.99 a barrel, after trading from $84 to $86.48
Total crude trading volume for Brent was only 2.2 percent above the 30-day average, but outpaced U.S. crude dealings by more than 2000,000 lots traded.
Monday's price strength followed the drops on Friday in both Brent, down more than 2 percent, and U.S. crude, down more than 3 percent, after a disappointing U.S. June jobs report.
Money managers raised their net long U.S. crude futures and options positions in the week to July 3, the U.S. Commodity Futures Trading Commission said.
Saudi Arabia said two men were killed following Sunday's arrest of a prominent Shi'ite Muslim cleric that stirred some protests in the country's oil-producing east.
"Minor protests in the east of Saudi Arabia are also providing support," said Richard Ilczyszyn, chief market strategist and founder of iitrader.com in Chicago.
With Norway's oil production facing a shutdown, Iran continues to try to circumvent sanctions on its crude exports. The sanctions were imposed by the United States and Europe to pressure Tehran to halt its disputed nuclear program.
An official said Saturday that Iran has reached agreements with European refiners to sell some of its oil through a private consortium.
Iran's foreign minister on Monday downplayed threats by Iranian officials in recent months to block the Strait of Hormuz, the region's vital oil shipping lane, and said that Iran was ready to talk about halting 20 percent uranium enrichment if its needs for fuel were fully met.
Weaker-than-expected Chinese inflation data and a report showing Japan's machinery orders fell at a record pace in May weighed on equities and curbed oil intraday, although oil drew support from expectations that China may do more monetary easing to stimulate growth.
Premier Wen Jiabao said on Sunday that China, the No. 2 oil consumer, needed to adjust policy to support its economy.
Investors were expected to remain cautious ahead of Chinese GDP data later this week, which is likely to show the weakest expansion in three years.
A 14.8 percent drop in Japan's core machinery orders in May could signal that companies are reacting to slowing global demand.
Slower economic growth in China and the United States and a deepening euro zone debt crisis helped push down Brent by 20 percent in the second quarter, the largest three-month loss since the 2008 financial crisis.
U.S. stocks fell as the weak economic data in Asia raised concerns about slowing global growth and made investors hesitant ahead of the upcoming earnings reporting season. .N
The euro rose against the dollar after recovering from a two-year low, but still looked fragile amid low expectations that a Monday euro zone finance ministers meeting will yield much progress in containing the region's debt crisis. <USD/>
Additional reporting by David Sheppard and Gene Ramos in New York, Christopher Johnson in London and Florence Tan in Singapore; Editing by Marguerita Choy and David Gregorio