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The Doha talks came and went yesterday. With little to show after Saudi Arabia largely refused to take action on oil output cuts without the cooperation of Iran.
But even as OPEC leaders were meeting in Qatar, a potentially bigger story for crude broke in a completely different spot.
Kuwait — OPEC’s fourth-largest oil producer.
That was the spot of a surprise strike by the country’s oil workers. With key union Oil & Petrochemical Industries Workers Confederation directing about 6,000 of its total 13,000 members to stand down from their jobs Sunday at Kuwait’s oil fields and refineries.
Related: Canada’s Oil Industry To See 62% Decline In Investment
The walk-off Sunday morning had an immediate and massive effect on Kuwait’s oil production. With officials from Kuwait Oil Company saying that Kuwait’s crude output has now been reduced to just 1.1 million barrels per day — down 61 percent from the 2.81 million b/d that Kuwait averaged last month.
This kind of strike action is extremely unusual within the Middle East oil-producing nations. And highlights some of the challenges these producers are facing right now because of lower crude prices.
Related: Saudi Arabia Kills Doha Deal, Talks Fall Apart
The Kuwait workers’ strike comes after national petroleum firms cut wages and benefits for its employees. Almost certainly a consequence of lower oil revenues biting into the bottom line for these companies, and requiring drastic cost-saving measures.
But the strike shows that making such financial adjustments isn’t going to be easy. Putting more pressure than ever on leaders in Kuwait and the rest of OPEC to take action in trying to bring oil prices back up.
Kuwait’s officials said they have enough supply to meet domestic demand and export commitments for the time being. But if the strike drags on, the situation could become more dire — watch for announcements on negotiations between workers and oil companies. And for upward momentum in the oil price if this supply disruption becomes longer-term.
Here’s to making everybody happy.
By Dave Forest
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Dave is Managing Geologist of the Pierce Points Daily E-Letter.