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.
In post-settlement trading, prices came off session highs following news that Iran's foreign minister downplayed in an interview recent threats to shut the Strait of Hormuz and 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 and affected crude shipments. 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, Norway's biggest offshore operator, said on Monday the company was preparing to start shutting down production after a midnight deadline (2200 GMT).
"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 1 percent above the 30-day average, but outpaced U.S. crude dealings by more than 200,000 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.
With Norway's crude 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, OPEC's second-largest producer, 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.
In Iraq, oil exports resumed from Basra terminals in the south, with 1.536 million barrels per day shipped out on Monday, after bad weather halted exports on Sunday.
THREAT FROM SLOWING GROWTH
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.
China's annual consumer inflation cooled to 2.2 percent in June, from 3.0 percent in May, official data showed on Monday.
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.
Premier Wen Jiabao said on Sunday that China, the No. 2 oil consumer, needed to adjust policy to support its economy. In March, Wen cut the 2012 growth target to 7.5 percent, which would be the lowest since 1990.
A drop in Japan's core machinery orders could signal that companies are reacting to slowing global demand. Orders fell 14.8 percent in May, much worse than a median forecast for a 3.3 percent drop and the biggest decline since comparable data became available in April 2005.
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.
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.