By April 18, 2016 Read More →

Oil prices steady as Kuwait strike offsets Doha concerns

Oil prices dropped Sunday after news of Doha talks failure

Oil prices

Oil prices rallied in Monday trading.  BP photo.

Oil prices stabilized on Monday as a strike by Kuwaiti oil workers offset investors concerns over the failure of oil production freeze talks in Qatar on Sunday.

The Kuwait oil workers strike involving 13,000 members of the Oil & Petrochemical Industries Workers Confederation began on Sunday.

The strike has cut the country’s output by 60 per cent, about 1.7 million barrels a day, which is slightly more than the global surplus noted in the first half of the year.

“Any price impact will be minimal unless there is a very clear indication that the strike will be prolonged and cause a significant reduction in Kuwait’s output,” Ed Hirs, a fellow in the Department of Economics at the University of Houston, said in an email.

Ehud Ronn, professor of finance at McCombs School of Business Univ. of Texas at Austin, says intermediate-term he remains bullish on oil prices relative to spot and relative to the futures prices.

“What’s interesting about the Kuwait strike is this:  It appears significant in scope, over a million b/d, and more profoundly, appears to have had an effect on price,” Ronn said in an email.

“Whereas initially the crude-oil spot price declined 6.8 per cent (to $37.61) — due to the failure of the Doha talks — it is closing only 1.39 per cent down at $39.77.  It would appear the mini-rally is attributable to the Kuwait strike.”

Brent crude was up 0.4 per cent, or 20 cents, at $43.30 a barrel after falling $3, while U.S. crude was down by 31 cents, or 0.8 per cent, landing at $40.05 a barrel.

Despite disappointing news from the Doha summit, some analysts are buoyed by optimistic news coming out of China and the U.S.

Rajeev De Mello, head of Asian fixed income at Schroder Investment Management Ltd. in Singapore told Bloomberg “While lower oil prices could be a threat, it’s definitely not the same situation we had in January.” De Mello added “We’ve a more positive situation in China. We have the Fed, which is very dovish anyway.”

Energy stocks also gained in Monday trading along with consumer shares.

 

 

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