Oil and gas workers are on strike in Norway, and it's escalating Europe's natural-gas crisis a week before a key pipeline with Russia shuts for maintenance

• Workers in Norway, the largest producer of oil and gas in Western Europe, are on strike.
• The strike is expected to cut Norway's gas production by 13% from Wednesday.

Europe's natural-gas crisis could deepen as workers in Norway — the continent's largest producer of the fuel — have gone on strike on Tuesday, the union leading the industrial action told Reuters.

About 15% of Norway's offshore oil and gas workers are members of the Lederne labor union that's on strike, according to Reuters. They are demanding wage increases to deal with rising inflation, which hit 5.7% in May — the highest since 1988, according to Norway's statistics agency.

Lederne union members voted down a proposed wage agreement last week, according to Reuters. Other oil and gas labor unions in the country have accepted the deal and are not on strike.

The Lederne strike could deepen an energy crisis in Western Europe, as Norway is the largest producer of oil and gas in the region. The country supplies 20% to 25% of the EU's and UK's natural-gas demand, according to Norway's Ministry of Petroleum and Energy.

The strike is expected to cut Norway's gas production by 13% and 130,000 barrels of oil by Wednesday, said the Norwegian Oil and Gas Association. A planned escalation by the union on Saturday could cut about a quarter of Norway's natural-gas output and 15% of its oil production, according to a Reuters calculation.

Natural-gas supplies for Europe are already tight

The strike comes at a time of tight natural-gas supplies for Europe as Russian state gas giant Gazprom has already cut gas flows to Germany via the key Nord Stream 1 pipeline by 60% from last month, citing an equipment hold-up in Canada as a result of sanctions over the war in Ukraine. The pipeline also supplies other countries in Europe.

Berlin fears the situation may get worse after the pipeline's scheduled shutdown for maintenance from July 11 to July 21. Germany's economy minister, Robert Habeck, said last week natural-gas flows may not resume after the scheduled works, which would in turn impact fuel storage ahead of winter, when demand spikes.

"Obviously this is not great for the EU, given the region is already having to deal with reduced pipeline flows from Russia," Warren Patterson, ING's head of commodities strategy, wrote on Tuesday.

Germany — Europe's largest economy — moved into the second stage of its three-stage emergency gas plan last month after Russia slowed supplies to the country. If the situation worsens, the country may start rationing natural gas in the last of the three-stage plan, as outlined by Germany's economy ministry.

Under the country's emergency plan, industry would be first in line for supply cuts. The move could devastate the economy and lead to job losses, Germany business leaders and unions have said.

Benchmark Dutch natural gas futures surged 10% on Monday on news of the strike in Norway.