Management and trades union officials from Scotland's Grangemouth refinery extended into Wednesday mediation aimed at avoiding a strike that has threatened Britain's energy supplies, a union official said.

"We have decided to adjourn and we will reconvene tomorrow at 9 a.m. (0800 GMT)," Phil McNulty, national officer for the UNITE union told journalists. He said the union was willing to negotiate up until Sunday, the potential start day for the stoppage.

If workers go ahead with the two-day strike and force the full shutdown of the 200,000 barrel per day (bpd) refinery, Scotland and northern England could face shortages of motor fuel, especially diesel, oil traders have said.

Refinery operator Ineos said North Sea oil supplies could also be disrupted by a refinery shutdown as the pipeline bringing North Sea Forties crude to Britain terminates at the refinery.

Ineos has already started closing one of the refinery's three crude processing units as part of a safety shutdown ahead of the strike.

Analysts believe up to 20 percent of British gas supplies could also be cut if the pipeline shuts.

The British government has moved to prevent a forecourt fuel shortage by exempting oil companies from competition restrictions that prevent them from sharing stock information, helping suppliers to line up stopgap deliveries in case the refinery shuts, the Department for Business has said.

Ineos said late on Monday it had offered concessions in a letter to 1,350 refinery employees.

Concerns the strike could lead to North Sea shut-ins helped send U.S. crude oil futures to record highs near $120 a barrel on Tuesday.

GAS THREAT

A spokeswoman for BP, which sold Grangemouth to Ineos but still operates the Forties pipeline, said BP had yet to quantify the potential effects of the strike on the pipeline, including Hound Point terminal where crude tankers are loaded for world markets.

"We are still seeking clarification from Ineos as to the potential impact on FPS operations and that does include Hound Point. We are still assessing the situation," she said.

If the Forties pipeline were to close completely, this will force North Sea producers to shut in not only oil output but gas equivalent to 20 percent of British gas supply, said a European oil and gas analyst, who declined to be identified.

If only Grangemouth refinery itself closes and Hound Point and its oil storage facility operate normally, losses to gas supply could be small, at only four percent of Britain's total.

"The key facility is the Hound Point terminal. That's where the oil storage is. If that's operating, it doesn't really matter that much whether the Grangemouth terminal is operating or not," the analyst said.