Oil Prices: Crude Steadies As Kuwait Strike Offsets Scuttled Output-Freeze Plan

This story was updated at 2:30 p.m. EDT.

Oil prices steadied Monday after a Kuwaiti workers' strike slashed the country's oil output by more than half, offsetting worries about a scuttled plan by major oil producers to freeze production.

The strike cut more than 60 percent of Kuwait's crude output, lending support to price benchmarks such as Brent and Dubai. Supply of refined oil product from the country also tightened due to scaled-back refinery runs and lower fuel exports.

Brent tumbled as much as 7 percent earlier Monday after oil majors from OPEC and non-OPEC Russia failed to reach agreement on a plan to freeze output.

The producers had gathered in Doha, Qatar, over the weekend for what was expected to be the rubber-stamping of a deal to stabilize 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 New York-headquartered Clipperdata.

Brent was up 20 cents, or 0.4 percent, at $43.30 a barrel by 12:32 p.m. EDT (1632 GMT). It had fallen $3 earlier in the session.

U.S. crude's West Texas Intermediate (WTI) benchmark was off 31 cents, or 0.8 percent, at $40.05 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 a nascent recovery in oil prices, 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, some analysts said.

"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," analysts at Goldman Sachs said in a note, referring to the first quarter.

A weakening U.S. 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.

WTI traded off Monday's lows after data from market intelligence firm Genscape showed crude inventories at the Cushing, Oklahoma, delivery point for U.S. crude futures falling by nearly 860,000 barrels during the week through April 15, traders who saw the data said.