Kuwait Oil-Worker Strike Curbing Crude Output for Second DayBy
Oil Production at 40% as strike continues for second day
Refineries operating at lower rates, companies borrow workers
Kuwait was seeking to restore crude production as thousands of oil workers stayed off their jobs for a second day in a strike that’s slashed the OPEC member’s output by about 1.7 million barrels a day, an amount exceeding the current global surplus.
Oil production plunged 60 percent to 1.1 million barrels a day when the strike began on Sunday, while the state refining company slowed operations at its three oil-processing plants to less than 60 percent of their combined capacity. Kuwait Petroleum Corp.’s oil-production and refining units are working to restart units and raise fuel-processing rates to full capacity, officials said Monday.
The efforts came a day after more than a dozen of the world’s major oil producers failed to reach an agreement to freeze output to halt a price rout of more than 30 percent over the past year amid a global glut. Kuwait pumped 2.81 million barrels a day last month, making it OPEC’s fourth-largest producer, while worldwide supply surpassed demand by 1.6 million barrels in the first quarter, according to the International Energy Agency.
“If the Kuwaiti strike persists, it re-balances the market,” Robin Mills, chief executive officer at consultant Qamar Energy in Dubai, said by phone. “So far it looks like Kuwait is meeting demand and supplying their commitments out of storage.”
Brent crude fell as much as $3, or 7 percent, to $40.10 a barrel Monday after the oil producers couldn’t reach an agreement for an output freeze during their meeting in the Qatari capital Doha. Saudi Arabia said it won’t restrain its production without commitments from other major producers including Iran, which has ruled out a freeze until it can recoup sales it lost while constrained by sanctions.
Oil workers in Kuwait are striking to protest cuts in pay and benefits as Middle Eastern crude exporters, reeling from lower oil income, cut subsidies and government handouts. The walkout is the first by oil workers in Kuwait since at least 1996, according to Middle East Economic Digest.
The strike may last 10 to 15 days, because the government set up a joint committee to negotiate with the union over 10 days, said Virendra Chauhan, a London-based oil analyst at Energy Aspects Ltd. “Assume a bit of time to return to work and ramp up,” he said. “Basically we are not expecting months of delay.”
KPC, the main national oil company, is able to meet its supply commitments to clients in spite of the walkout, the official Kuwait News Agency reported Monday, citing the oil industry’s spokesman, Sheikh Talal Al-Khaled Al-Sabah. Refiner Kuwait National Petroleum Co. was processing about 520,000 barrels of oil a day, the same amount as Sunday, and all three of its plants were operating, Khaled Al-Asousi, the company’s spokesman, said by phone. Union officials didn’t respond to calls or text messages.
Kuwait Oil Co., KPC’s production arm, is dealing with “the crisis,” working to activate two facilities after it restarted another unit in the country’s north, Kuna reported Monday, citing Sheikh Talal. Oil companies are using skilled workers from the Ministry of Electricity & Water to help run their plants, he said. KNPC will resume processing crude at full capacity after a few days, Al Arabiya television reported, citing Al-Asousi.
The plunge in Kuwait’s output “is just shocking,” Edward Bell, a commodities analyst at Dubai-based bank Emirates NBD PJSC, said Sunday by phone. “That would take care of the surplus right there.”
The government told KPC to find workers to keep the operations running and asked authorities to take legal action against anyone causing suspension of activities at vital facilities or harming national interests, Kuna reported, citing the cabinet.
Such a wide-ranging strike that affects vital industries is rare in the Gulf, said Bell. “This is not the sort of thing you’d expect to see in this part of the world.”
Omani labor unions called off a strike in November after talks with the government and oil companies about potential layoffs. Kuwaiti port workers stayed off their jobs in 2011 and 2012 in stoppages that didn’t ultimately affect oil shipments.
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