Oil rose around two percent on Tuesday as a strike by oil workers in Kuwait nearly halved crude production from the OPEC member, overshadowing bearish sentiment following Sunday’s failure by producers to agree to freeze output levels.
Thousands of Kuwaiti oil workers downed tools for a third day on Tuesday to protest against planned public sector pay reform, cutting crude output to 1.5 million barrels per day (bpd), according to an oil spokesman cited by news agency KUNA.
That is little more than half of Kuwait’s average output of 2.8 million bpd in March.
“The Kuwaiti strike is supporting prices,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Brent crude futures, the global benchmark, traded at $43.72 a barrel at 1023 GMT, 81 cents, or 1.9 percent, above Monday’s close. U.S. crude futures were up 64 cents, or 1.6 percent, at $40.42 a barrel.
However, analysts said Kuwait’s disruption would likely be brief and investors would soon refocus on the market’s oversupply given the failure of major exporters on Sunday to agree to freeze output to avoid worsening the glut.
“In the coming days oil production is likely to partially recover from its initial drop as non-striking staff is redistributed and inventories drawn upon, avoiding a force majeure on loadings,” policy risk consultancy Eurasia Group said.