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Kuwait oil output rises to 1.5 million barrels a day amid strike

[DUBAI] Kuwait's crude output edged higher to 1.5 million barrels a day as the state oil company brought more production facilities back on line after halting some operations at the start of a labor strike now in its third day.

Production in northern Kuwait returned to a normal level and Kuwait Petroleum Corp restarted units in the country's southeast, helping boost overall output, the oil industry's spokesman, Sheikh Talal Al-Khaled Al-Sabah, said in a post on Instagram. 

The work stoppage, which began Sunday, had caused the OPEC member's output to plunge 60 per cent to about 1.1 million barrels a day. The initial decline of 1.7 million barrels a day from March levels surpassed the surplus in global supply. KPC, the main national oil company, is able to meet its supply commitments to clients in spite of the walkout, Sheikh Talal reiterated Tuesday.

The "strike is on," Kuwait National Petroleum Co's spokesman, Khaled Al-Asousi, said in a text message, confirming that union members were staying off their jobs for a third day in a dispute over benefits. Attempts to reach a settlement failed after talks with the union broke up at 3 am Tuesday, said a government official who asked not to be identified because the negotiations are private.

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Oil gained, with Brent crude rising as much as 2.2 per cent to US$43.86 a barrel. It traded at US$43.67 a barrel at 8:29 am in London. Kuwait pumped 2.81 million barrels a day last month, making it the fourth-largest producer in the Organization of Petroleum Exporting Countries, while worldwide supply surpassed demand by 1.5 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 Monday. "So far it looks like Kuwait is meeting demand and supplying their commitments out of storage."

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. Union officials haven't been responding to requests for comment since the strike began.

"The substantial impact of the Kuwait strike has added significantly to the various short-term shut-ins around the world," consultants FGE said in a note on April 18. The Kuwaiti cuts are "pretty well trebling the shortfalls" from unplanned disruptions in countries including Opec members Nigeria, Iraq and Venezuela, it said.

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 Monday. "Basically we are not expecting months of delay."

As oil production plunged Sunday, the state refiner Kuwait National Petroleum Co slowed operations at its three oil- processing plants to less than 60 per cent of their combined capacity. The company was processing about 520,000 barrels of oil a day through Monday, the same amount as on Sunday, and all of its plants were operating, Al-Asousi said. He didn't give an update of refinery operations on Tuesday. KNPC will resume processing crude at full capacity after a few days, Al Arabiya television reported, citing Al-Asousi.

Oil companies are using skilled workers from the Ministry of Electricity & Water to help run their plants, Sheikh Talal said. The government discussed bringing in foreign workers from Saudi Arabia and Bahrain to operate facilities during the strike, newspaper al-Qabas reported Tuesday, without saying where it got the information.