Oil narrowed a decline as a labor strike in Kuwait cut output for a second day, counteracting the failure of producing nations to reach an output-freeze agreement in Doha.
Kuwait was seeking to restore crude production as thousands of oil workers stayed off their jobs for a second day in a strike that’s slashed the fourth-largest OPEC member’s output by about 60 percent to 1.1 million barrels a day. Futures sank as much as 6.8 percent earlier in New York, the most in two months, after output talks Sunday in the Qatari capital between the world’s biggest producers ended without an agreement to limit supplies.
“Prices have recovered a bit of what they’d lost short term, said Mike Wittner, head of oil markets at Societe Generale SA in New York. “Obviously, the Kuwait disruption is offsetting” the failure of the talks, he said.
West Texas Intermediate for May delivery was 53 cents lower at $39.83 a barrel at 12:12 p.m. on the New York Mercantile Exchange. Brent crude for June settlement was 11 cents lower at $42.99 on London’s ICE Futures Europe exchange, reversing a 7 percent drop.
Oil workers in Kuwait are striking to protest cuts in pay and benefits as Middle Eastern crude exporters, reeling from lower oil income, cut subsidies and government handouts. The walkout is the first by oil workers in Kuwait since at least 1996, according to Middle East Economic Digest.
The strike may last 10 to 15 days, because the government set up a joint committee to negotiate with the union over 10 days, said Virendra Chauhan, a London-based oil analyst at Energy Aspects Ltd. “Assume a bit of time to return to work and ramp up,” he said. “Basically we are not expecting months of delay.”
Oil ministers from 16 nations, representing about half the world’s output, gathered in a bid to stabilize the global market, the first significant attempt at coordinating oil output between the Organization of Petroleum Exporting Countries and nations outside the group in 15 years. Discussions stumbled after Saudi Arabia and other Gulf nations wouldn’t agree to any deal unless all OPEC members joined including Iran, which wasn’t present at the meeting, Russian Energy Minister Alexander Novak told reporters.
“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,” Ed Morse, head of global commodity research at Citigroup Inc., said by phone. “They are fearful that the world may be in a weak or bearish market for a long period of time. In a bear market, as they learned from the 1980s, if they cede market share it is very difficult to get it back.”
The loss of output from the strike exceeds the global surplus that pushed prices to a 12-year low earlier this year.
“If the potential loss of Kuwaiti crude supply is sustained long enough, that is roughly equivalent to current estimates for the global stockpile build in the second quarter,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA. “Of course, there is a big ‘if’ in terms of how long the strike will last.”