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Statoil (NYSE: STO) has announced plans to halt all production amidst a labor dispute over pension benefits. This follows news last week that Statoil would cut 1.8 million barrels per day in production.

As the world's eighth-largest oil producer by volume, Statoil shutting down production shrinks supply, sending prices higher. Brent crude prices rose 2.23 percent in afternoon New York trading to $100.38 per barrel. Statoil, which is 75 percent owned by the Norwegian government, said that all 6,500 employees would be unable to work should the two sides not be able to agree on pension benefits.

Statoil is a large exporter of oil to Europe, and the climb in Brent crude prices is only further pain for fledgling European economies. Coupled with the recent Iranian import ban that took effect July 1, Europe is seeing a lack of oil supply, keeping a bid under prices. Elevated oil prices could continue to squeeze margins at the corporate level, minimizing tax revenues and forcing governments to miss deficit targets.

The labor strike affects all companies that operate in the North Sea, including Total S.A. (NYSE: TOT), ConocoPhillips (NYSE: COP), Royal Dutch Shell (NYSE: RDS-A)(NYSE: RDS-B), and BP (NYSE: BP).

Statoil shares fell 0.09 percent in trading Monday to $23.25 per share.

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