(Bloomberg) -- Kuwait’s crude production tumbled by 60 percent and its refineries scaled back operations as the state oil company took emergency measures to cope with the first day of an open-ended labor strike.
The OPEC member’s production dropped to 1.1 million barrels a day, Saad Al-Azmi, deputy chief executive for finance and spokesman at Kuwait Oil Co., said in posts on Instagram and Twitter on Sunday when workers walked off the job. Kuwait Petroleum Corp., the parent company for KOC and other operating units, will provide fuel to the local market and can meet demand from international customers for exports, it said on Twitter.
Kuwait is among Middle Eastern oil producers that are cutting spending and benefits to plug holes that the oil-price drop of nearly 30 percent in the past year has punched in government budgets. Prices have fallen as rising output from the Organization of Petroleum Exporting Countries and other suppliers has created a global glut. Kuwait produced 2.81 million barrels a day last month, making it OPEC’s fourth-largest member, while worldwide supply exceeded demand by 1.6 million barrels in the first quarter, according to the International Energy Agency.
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. In this market that is so driven by sentiment, for sure it will have an impact on price.”
Oil ministers from producing countries such as Saudi Arabia, OPEC’s largest member, and Russia met in Doha Sunday to discuss a proposal to freeze oil output to help prop up prices. Brent crude closed at $43.10 a barrel Friday, posting gains of about 25 percent since the freeze was proposed in mid-February.
Kuwait’s oil and gas refineries were processing 520,000 barrels a day of crude on Sunday, said Khaled Al-Asousi, spokesman for Kuwait National Petroleum Co. The state-owned refinery unit reduced processing rates at the country’s three oil plants, which have a combined capacity of about 900,000 barrels a day, due to emergency measures and because less supply is available from KOC, he said.
Members of the 13,000-strong Oil & Petrochemical Industries Workers Confederation are protesting cuts in their wages and benefits, Saif Al Qahtani, the union’s leader, said by phone Thursday. About 6,000 workers walked off the job when the strike began, CNBC Arabiya cited him as saying. Union officials couldn’t be reached for comment.
The Kuwaiti government asked KPC to find workers to keep the operations running and told authorities to take legal action against anyone causing a suspension of activities at Kuwait’s vital facilities, state-run Kuwait News Agency reported, citing a statement from 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.
--With assistance from Nour Al Ali. To contact the reporter on this story: Anthony DiPaola in Dubai at firstname.lastname@example.org To contact the editors responsible for this story: Nayla Razzouk at email@example.com Claudia Carpenter, Paul Jarvis
Copyright 2017 Bloomberg News.
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