Oil production hit by Kuwait labour strike as Brent holds above $40

The strike in Kuwait cut output by more than half from Opec’s fourth-biggest producer.

Oil held near $40 a barrel as a strike in Kuwait cut output by more than half from Opec’s fourth-biggest producer.

Futures were little changed in New York. Prices slipped 1.4 per cent Monday after the world’s biggest producers failed to reach an agreement to limit supplies. A labour strike that started Sunday in Kuwait reduced output for a second day after production plunged 60 per cent to 1.1 million barrels a day.

A deal to cap output fell through on Sunday after Saudi Arabia insisted it wouldn’t restrain production without commitments from other major producers including Iran, which has ruled out freezing for now. Kuwait Petroleum Corp’s crude production and refining units are working to restart facilities and raise processing rates to full capacity, officials said Monday.

“This is quite a significant disruption to production” from Kuwait, Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “The recent overall strength of the oil market over the past couple of months or few weeks has not primarily been about Doha, it has primarily been about an overall improvement in the market’s outlook for medium-term fundamentals.”

West Texas Intermediate for May delivery, which expires Wednesday, traded at $39.72 a barrel on the New York Mercantile Exchange, down 6 cents, at 11.22am Tokyo time. Prices on Monday fell as much as 6.8 per cent before settling at $39.78 a barrel. Total volume traded was about 30 per cent below the 100-day average. The more-active June contract lost 15 cents to $41.04 a barrel.

Brent crude for June settlement was at $42.76 a barrel on the London-based ICE Futures Europe exchange, down 15 cents. The front-month contract dropped 19 cents to $42.91 on Monday. The global benchmark traded at a $1.74 premium to June WTI.

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.

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