Oil prices resumed falls Wednesday after petroleum workers called off a strike in key OPEC producer Kuwait, quashing hopes the disruption could help ease a persistent supply glut.
Around 1100 GMT, US benchmark West Texas Intermediate (WTI) for delivery in May was down 91 cents at $40.17 a barrel.
Brent North Sea crude for June delivery fell 70 cents to $43.32 a barrel compared with Tuesday’s close.
Prices “are coming under pressure again… after oil workers in Kuwait agreed to end their strike against wage and job cuts and work to return output to pre-strike levels”, said analyst Craig Erlam at trading firm Oanda.
“Despite an initial sell-off on Monday, the strike in Kuwait… had managed to more than offset the disappointment at the lack of a deal in Doha over the weekend that would have seen a number of major oil producers freeze output.”
The market had ended a four-day losing streak on Tuesday, surging also on the back of the weak dollar.
“Yesterday’s surge in oil prices was ultimately down to a weaker dollar and misplaced hopes that the Kuwaiti strike might continue and thus put a dent in the present supply glut,” said analyst London Capital Group analyst Brenda Kelly.
A faltering greenback makes dollar-denominated crude cheaper for buyers using stronger currencies, thereby stimulating demand.
But prices sank again on Wednesday after the Kuwait Oil Workers Union ended their mass action and decided to return to work, hours after a fresh appeal by the acting oil minister.
The strike, which began on Sunday, had slashed Kuwait’s crude and natural gas production by more than half.
The world’s major crude producers met in Doha last Sunday to discuss calls to freeze output, but they failed to reach agreement and prices plunged in early deals on Monday.
Bernard Aw, market strategist at IG Markets Singapore, said that while Kuwait’s strike pointed to a momentary easing of supply conditions, the general trend of oversupply remains.
“The strike has had a very short-term impact… It’s hardly a dent to global oil production itself,” he told AFP.
“Everybody more or less knew that the strike was not going to last very long, this is just the market reacting to it.”
In Kuwait, the striking workers said they called off their mass action “in respect for the emir and in loyalty to him”.
Later on Wednesday, oil market experts will digest the US government’s snapshot of energy inventories for last week.
Market expectations are for a gain of three million barrels in the week to April 15, according to analysts polled by Bloomberg.
The weekly inventory report is widely regarded as a crucial gauge of demand in the world’s top oil consumer.