FSM News

On Tuesday, Oil prices increase as a strike in Kuwait reduce big amounts of crude out of the supply chain, however,  analysts stated the commotion would be brief and that markets would soon adjust on a worldwide supply excess.

On Sunday,  Kuwaits crude production drop, to 1.1 million barrels per day, from 2.8 million barrels per day in March as thousands of workers went on strike.

Brent crude was at $43.25 per barrel at 0651 GMT, 34 cents beyond their previous close. U.S. West Texas Intermediate (WTI) futures increased 33 cents at $40.11 a barrel.

However, shipping data on Thomson Reuters Eikon shows that Kuwait has loaded a 2 million barrel crude tanker in spite of the strike, and that three additional vessels are recently waiting to deal with crude.


Kuwaiti representatives stated they would be able to hike production, in spite of the open-ended strike, by means of crude from inventory and by taking legal action against unions.

Similarly, analysts anticipate the commotion to be short and markets to soon refocus on the worldwide excess given the disappointment of big exporters to settle on a production freeze at their Sunday meeting.

Furthermore, the government is expected to negotiate with the strikers to completely restart exports, stated by other analysts.

Policy risk consultancy Eurasia Group said "Sensitive to union pressure, the government is likely to compromise on most of striking oil workers pay demands."

"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," the Eurasia Group added.

As soon as Kuwaits exports completely restart, traders said the market would once more focus on a worldwide surplus that sees 1 million to 2 million barrels of crude pumped every day in a glut of demand.

On Sunday,  an agreement to freeze oil production by OPEC and non-OPEC producers drop apart after Saudi Arabia required that Iran join in spite of calls on Riyadh to save the contract and help uphold crude prices.

Analysts said the unsuccessful Doha contract was mainly a setback to market sentiment rather than fundamentals, that stayed weak,however,  are improving as production fell, particularly in North and South America.

"The lack of a freeze agreement, while devastating for sentiment, does not impact oil balances, which are already on the mend," Energy Aspects stated, even though adding that a complete rebalancing was not likely before late 2016 or early 2017.


Some analysts stated prices might remain low for a while.

Vivien Yang, a Hong Kong-based partner at law firm Simmons & Simmons, which specializes in the oil and gas sector said."It is nearly impossible to influence the oil price long-term by freezing production as unconventional oil and gas and alternative energy may enter the market to bring down the price,"