Oil Prices Whipsawed by Doha Failure, Kuwaiti Strike
Oil field workers in Kuwait walked off their jobs Sunday, cutting production from the country by 60%. The strike was timed to coincide with the producing nations’ meeting taking place in Doha.
The Doha meeting was a complete bust, after Saudi Arabia repeated its demand that Iran agree to cap production before the Saudis would agree to a similar restriction. Iran did not even send a representative to the meeting, although one was expected to attend.
The failure of the producing nations to agree to a (meaningless) freeze on production sent crude prices higher overnight, but the strike in Kuwait could act as a counterbalance. Kuwait has been producing about 2.85 million barrels a day, and that total has now been cut to around 1.1 million barrels. A Kuwaiti spokesman has said that exports are not affected and production is rising again.
The Kuwaiti news agency said in a press release Sunday:
The cabinet has entrusted involved agencies with taking legal action against unacceptable practices, and with bringing to accountability anybody involved in the disruption of the country’s vital utilities.
The cabinet said in a statement on Sunday it had asked Kuwait Petroleum Corporation (KPC) to take all necessary measures in order to provide required workers in order to keep work and production at oil facilities, and to honor local and international commitments.
The workers are protesting cuts to wages and benefits and about 6,000 of the union’s 13,000 members walked out on Sunday. The Kuwaiti deputy premier said that “KPC would keep intact oil workers’ rights and benefits gained in line with the arbitration body and relevant international conventions.” But the cabinet also noted that the country’s dispute-settlement mechanism “does not include labor strikes.”
West Texas Intermediate crude oil prices fell below $38 a barrel early Monday morning and traded at around $39 a barrel in electronic trading shortly before pit trading opened. The May contract closed at $40.36 a barrel on Friday.