Oil prices slide 2% as Kuwait workers call off 3-day strike
London (Apr 20) Crude oil prices slumped on Wednesday after Kuwait oil workers called off a three-day strike, a key support that kept oil prices afloat after major global producers failed to agree to a production freeze last weekend.
West Texas Intermediate crude oil for May CLK6, -1.80% which expires after the market settles on Wednesday, lost 87 cents, or 2.1%, to $40.21 a barrel. The June contract CLM6, -1.46% gave up 76 cents, or 1.7%, to $41.71.
June Brent crude LCOM6, -1.32% on London’s ICE Futures exchange fell 69 cents, or 1.6%, to $43.34 a barrel.
According to Kuwait News Agency, the strike organizer Oil and Petrochemical Industries Workers Confederation said the strike was “overwhelmingly successful” through which participants displayed their “ability to affect the production process which was achieved.”
The strike reduced around 60% of the country’s daily production to around 1.1 million barrels a day, said BMI Research.
“[The end of the strike] removes one of the key supports that allowed prices to recover easily after the disappointing outcome of the Doha talks,” said Tim Evans, a Citi Futures analyst.
“At a minimum, the relatively quick resolution of the strike will test whether traders remain eager to buy on dips or whether we see a cycle of long liquidation,” he added.
Read: Why aren’t oil prices lower after failed Doha meeting?
Earlier in the week, prices rose as the market looked past the failure of a group of major oil producers to agree on an output freeze by focusing on supply outages around the world.
Apart from Kuwait, disruptions in Iraq, Nigeria, and the North Sea also curtailed global output by around 750,000 barrels a day, roughly half the rate at which the total world supply is estimated to be growing.
“With oversupply back in focus, prices are likely [to] fall in the near term amid slower demand growth,” said Gao Jian, an energy analyst at the Shandong-based SCI International.
Growth in global oil demand is expected to moderate to around 1.2 million barrels a day in 2016, below the 1.8 million barrels a day expansion last year, based on the latest monthly report by global energy watchdog International Energy Agency.
Read: Get ready for an epic post-Doha battle for oil market share
This week, market watchers will be taking cues from the weekly U.S. production and inventories data released by the U.S. energy department.
Analysts surveyed by The Wall Street Journal expect crude inventories to rise by 2 million barrels. The American Petroleum Institute, an industry group, said late Tuesday that its own data for that week showed a 3.1-million-barrel increase in crude supplies, a 1-million-barrel decrease in gasoline stocks and a 2.5-million-barrel decrease in distillate inventories, according to market participants.
Nymex reformulated gasoline blendstock for May RBK6, -0.80% — the benchmark gasoline contract — fell 0.9% to $1.47 a gallon, while May ICE gasoil for May changed hands at $373.50 a metric ton, down 1.3% from Tuesday’s settlement.
Source: MarketWatch
