Brent and WTI crude are coming under pressure again on Wednesday after oil workers in Kuwait agreed to end their strike against wage and job cuts and work to return output to pre-strike levels. Despite an initial sell-off on Monday, the strike in Kuwait which wiped out the 1.5 million barrels of excess supply each day, had managed to more than offset the disappointment at the lack of a deal in Doha over the weekend that would have seen a number of major oil producers freeze output.
The result of all of this is that oil production is now likely to remain high which could put crude prices under serious pressure once again. While there are still possible supply disruptions in Venezuela and Nigeria which could help support prices, yesterday’s reports that Russia is looking to increase output and exports after talks collapsed in Doha could spark a market share war, with some other major producers including Saudi Arabia also seeking to raise output.
Whatever the outcome here, oil prices are likely to remain quite active and for now at least, the path of least resistance does appear to be to the downside with the story once again being one of oversupply.
What is interesting though is that despite Kuwait being touted as being responsible for the rebound off Monday’s lows, we’re not even close to testing this level again despite it going back on line. It will be interesting to see if this can be sustained throughout the day, which may suggest there are increasing expectations of further supply disruptions down the line, potential driven by similar social unrest to that seen in Kuwait in other oil producing countries.
If today’s EIA crude inventory number confirms APIs data on Tuesday in showing another build last week of around 3.1 million barrels, it could provide further downside incentive in oil prices.
The U.K. jobs report will be released this morning and is expected to show unemployment remaining at 5.1%, with the claimant count falling by around 10,000. Meanwhile, average earnings including bonus’ are expected to have risen by 2.3% in February up from 2.1% a month earlier. This would suggest we’ve seen a rebound in wages since the dip at the end of last year and start of this year, something that will please the Bank of England as it seeks to get inflation back towards its 2% target, something it’s some way from achieving at the moment.
We’ll also hear from Mario Draghi today as he delivers the opening remarks at the ECB Generation Euro Competition in Frankfurt. The speech comes only 24 hours before tomorrow’s ECB monetary policy decision at which no changes are expected following March’s wide ranging stimulus announcement.
For a look at all of today’s economic events, check out our economic calendar.