Oil steadies as Kuwait strike offsets scuttled output freeze

Oil prices steadied on Monday after a Kuwaiti workers' strike that slashed more than half the country's oil output offset worries about a scuttled major producers' freeze plan that sent the market tumbling earlier.

The strike cut more than 60 percent Kuwait's crude output, lending support to price benchmarks such as Brent and Dubai, and tightened refined product supplies as the country scales back refinery runs and fuel exports.

Brent had tumbled as much as 7 percent earlier on Monday after oil major producers from the Organisation of the Petroleum Exporting Countries and non-OPEC Russia failed to reach agreement on a plan to freeze output.

The producers had gathered in Qatar, Doha at the weekend for what was expected to be the rubber-stamping of a deal to stabilise output at January levels until October.

The deal crumbled when OPEC heavyweight Saudi Arabia demanded Iran join the plan, despite Tehran's repeated assertions it would not.

"The material loss in production from the Kuwait strike has helped the oil market forget about the farce from Doha," said Matt Smith, director of commodity research at the New York-headquartered Clipperdata.

Data from market intelligence firm Genscape showed crude inventories at the Cushing, Oklahoma delivery point for US crude futures' West Texas Intermediate (WTI) benchmark falling nearly 860,000 barrels for the week to Apr 15, traders who saw the data said.

Brent was down 15 cents, or 0.4 percent, at $42.95 a barrel by 12:06pm EDT (1606 GMT). It had fallen $3 earlier in the session.

WTI was off 55 cents, or 1.3 percent, at $39.81 a barrel, after sliding to $37.61 at the day's low.

Brent's premium versus WTI was at its widest in nearly two months.

While fallout from the Doha plan could weigh on the nascent recovery in oil, the market may not tumble as much as it did earlier this year, when Brent hit 12-year lows of around $27 in late January.

"Gradually declining non-OPEC production as well as planned maintenance in the face of resilient oil demand in Q1 have recently pointed to improving oil fundamentals," Goldman Sachs said in a note, referring to the first quarter.

A weakening US dollar and the mostly steady climb in global equities since February was supportive to oil too, traders said.

"While a few forecasters may be dusting off some old $20 WTI expectations as a result of the Doha outcome, we expect solid support in nearby WTI at the $35 mark," Jim Ritterbusch at Chicago oil consultancy Ritterbusch & Associates said.