Oil traded near $40 barrel in New York as a strike in Kuwait cut output from OPEC’s fourth-biggest member, countering the bearish impact of a failed bid to reach an agreement to freeze production.
Futures rose as much as 2 percent in New York. The labor stoppage in Kuwait that initially slashed daily output by as much as 1.7 million barrels entered a third day. Prices slipped 1.4 percent Monday after the world’s biggest producers failed to reach an agreement Sunday in Doha to limit supplies amid a global glut.
“The chatter is all about the Kuwaiti strike and not the failure at Doha,” said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. “The drop in Kuwait output together with other disruptions and the expected decline in American production is adding a certain buoyancy to the market.”
The Doha talks collapsed on Sunday after Saudi Arabia insisted it wouldn’t restrain output without commitments from other major producers including Iran, which has ruled out freezing for now. That’s also raised concern that the Middle East producers may boost supply amid an intensifying battle for market share. Meanwhile, the “ substantial impact” of Kuwaiti production cuts has added to other global disruptions, according to industry consultants FGE.
West Texas Intermediate for May delivery, which expires Wednesday, rose 33 cents to $40.11 a barrel at 9:01 a.m. on the New York Mercantile Exchange. Prices on Monday fell as much as 6.8 percent before settling at $39.78. Total volume traded was 22 percent above the 100-day average. The more-active June contract advanced 29 cents to $41.48 a barrel.
Brent crude for June settlement climbed 44 cents, or 1 percent, to $43.35 a barrel on the London-based ICE Futures Europe exchange. Futures dropped 19 cents to $42.91 on Monday. The global benchmark traded at a $1.87 premium to June WTI. The front contract traded at a premium, or backwardation, to the second month for a fourth day, of 20 cents.
Kuwait’s crude output, which plunged 60 percent to about 1.1 million barrels a day after the strike began, has edged higher to 1.5 million a day as the state oil company brings some production back on line. Workers are protesting pay and benefit cuts as Middle Eastern crude exporters, reeling from lower oil income, curb subsidies and government handouts. It’s the first walkout of oil workers in Kuwait since at least 1996, Middle East Economic Digest said.
“Underlying market balances do seem to be improving quite fast, helped by a number of unplanned outages, the latest of which is in Kuwait,” Kevin Norrish, managing director for commodities research at Barclays Plc in London, said in a Bloomberg Television interview.
“The market seems to be re-balancing pretty well without OPEC and the problems between Saudi Arabia and Iran don’t yet seem to be a major stumbling block to higher prices.”
Trading in oil options surged on Monday after the breakdown of the Doha discussions, according to data compiled by Bloomberg. Transactions of “put” contracts that allow traders to sell June Brent futures at $40 a barrel, the most widely traded option of the North Sea grade, climbed by 47 percent to 17,156 lots, the data show.
US crude inventories probably rose by 3 million barrels in the week ended April 15, according to a Bloomberg survey conducted before an Energy Information Administration report Wednesday. Refinery utilization was probably unchanged at 89.2 percent, while crude stockpiles at Cushing slipped 10,000 barrels to 64.5 million, the survey showed.
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