Kuwaiti oil strike steadies markets as Doha talks fail
Oil prices steadied yesterday after a Kuwaiti workers' strike slashed the country's oil output by more than half, offsetting worries about a scuttled plan by major oil producers to freeze production.
The strike - the first of its kind in 20 years - cut more than 60pc Kuwait's crude output, lending support to price benchmarks such as Brent and Dubai. Supply of refined oil product from the country also tightened due to scaled-back refinery runs and lower fuel exports.
Brent tumbled as much as 7pc earlier in the day after oil majors from the Organisation of the Petroleum Exporting Countries and non-OPEC Russia failed to reach agreement on a plan to freeze output.
The producers had gathered in Qatar, Doha at the weekend for what was expected to be the rubber-stamping of a deal to stabilize output at January levels until October. The deal crumbled when OPEC heavyweight Saudi Arabia demanded Iran join the plan, despite Tehran's repeated assertions it would not.
"The material loss in production from the Kuwait strike has helped the oil market forget about the farce from Doha," said Matt Smith, director of commodity research at the New York-headquartered Clipperdata.
Brent was up 20 cents, or 0.4pc, at $43.30 a barrel by the end of trading. It had fallen $3 earlier in the session.
US crude's West Texas Intermediate (WTI) benchmark was off 31 cents, or 0.8pc, at $40.05 a barrel, after sliding to $37.61 at the day's low.
Brent's premium versus WTI was at its widest in nearly two months.
While fallout from the Doha plan could weigh on a nascent recovery in oil prices, the market may not tumble as much as it did earlier this year, when Brent hit 12-year lows of around $27 in late January, some analysts said.
"Gradually declining non-OPEC production as well as planned maintenance in the face of resilient oil demand in Q1 have recently pointed to improving oil fundamentals," analysts at Goldman Sachs said in a note, referring to the first quarter.
A weakening US dollar and the mostly steady climb in global equities since February was supportive to oil too, traders said.
"While a few forecasters may be dusting off some old $20 WTI expectations as a result of the Doha outcome, we expect solid support in nearby WTI at the $35 mark," Jim Ritterbusch at Chicago oil consultancy Ritterbusch & Associates said.
However the others believe the Kuwati workers strike will only serve to provide short term relief to oil explorers which had been banking on a deal to freeze production to come out of the Doha talks.
"The weekend talks are a demonstration that the Saudi government, as the deputy crown prince has clearly stated, doesn't want to cede market share," said Ed Morse, head of global commodity research at Citigroup. "If they cede market share it is very difficult to get it back."
WTI traded off Monday's lows after data from market intelligence firm Genscape showed crude inventories at the Cushing, Oklahoma delivery point for US crude futures falling by nearly 860,000 barrels during the week to April 15, traders who saw the data said. (Reuters)