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Oil workers are pictured as they work at the Oseberg oil field, in the North Sea, in this Nov. 25, 2008 file photo. A strike in Norway's oil sector is delaying the loading of Oseberg crude cargoes in July

Marit Hommedal/Reuters

Anxious to break the deadlock after three weeks of strikes, Norway's oil industry is threatening to shut down the country's North Sea oil production.

If all of Norway's production were to shut, it would affect up to two million barrels per day of petroleum supplies – roughly what Iran ships through the Strait of Hormuz.

There's still time for an eleventh hour intervention by the Norwegian government to force an end to the strike. But the situation is a salutary reminder of oil's ability to surprise even when demand is weak.

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Only in June, it was common to hear predications that Brent had further to fall in spite of sliding nearly 30 per cent from its March highs.

The thinking was that aggressive Saudi oil production and faltering global demand had left the world swimming in crude.

But Brent has jumped 11 per cent since a June 21 low of $89 US a barrel and $100 is now in sight again.

Of course, Norway isn't the only reason the bears were wrong.

Oil's recent bounce has coincided with a new round of central bank action in the United States and Europe, and a surprise rate cut in China. The pessimists probably also took too rosy a view of oil supplies and geopolitics.

Whether it's striking workers in the North Sea or rising tensions in the Persian Gulf – where Iran has resumed its sabre-rattling after new sanctions took effect on July 1 – oil markets remain vulnerable to supply disruptions that are by nature difficult to predict.

The looming shutdown in Norway may end up being a tempest in a teapot. The country's oil workers, who are demanding the right to retire at age 62 with full pensions, don't appear to enjoy widespread public support. There's still time for Norway's government to step in and any shutdown would anyway likely be short-lived.

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Still, oil bears should come away with their complacency shaken. In a market rife with difficult-to-price geopolitical risk, it's brave to be short oil.

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