Norway's government intervened to end a 16-day oil strike just minutes ahead of a threatened lockout.

The lockout would have halted production by western Europe's largest crude exporter.

The dispute over pensions between unions and employers - in what is the world's eighth-biggest oil exporter and second-biggest exporter of gas - will now go to binding arbitration.

"The strike is over," labour ministry spokesman Jan Richard Kjelstrup said after the last-ditch deal.

The lockout, which was to have been enforced from midnight, had loomed after talks between employers and unions failed to end a strike involving more than 700 workers, which began on 24 June.

Unions wanted employers to reconsider a decision not to grant special benefits to those who wish to retire at the age of 62, three years before the legal retirement age in the field and five years before the country-wide age.

The deal sent North Sea crude prices plunging below the key $100 threshold in Asian trading.

Norway's state-owned giant Statoil, the group most hit by the strike, said it was already ramping up to resume production at sites affected by the movement.

It expects normal output levels by the end of the week.

The lockout would have prevented more than 6,500 people from going to work on the Norwegian continental shelf and cut off production of about two million barrels of oil equivalent a day.

Jan Hodneland, a negotiator for the Norwegian Oil Industry Association (OLF) employers' group, said the government had made a "responsible choice".

"We are now relieved that we do not have to shut down the production on the Norwegian continental shelf, however, we were ready to initiate a lockout if the government did not intervene."

Labour Minister Hanne Bjurstrom said a production stoppage would have hit supplies to Europe as well as Norway's credibility as an energy exporter.

Leif Sande, the head of the Industri Energi union, said his members felt "betrayed" but trade unions nonetheless called on members to resume work immediately.

Oil prices had surged yesterday ahead of the looming lockout.