The sharp drop in oil prices following the collapse of talks in Doha was cushioned by a Kuwaiti oil industry strike today.
Brent crude, the global benchmark, tumbled more than seven per cent in early trading after oil majors, Opec (the Organisation of Petroleum Exporting Countries) and Russia failed to agree on a plan to freeze oil output at January levels for six months during a meeting in Doha on Sunday.
However, last night it was trading up 0.06 per cent at $43.16 cent per barrel, having briefly touched a higih of $43.43. West Texas Intermediate crude, the US benchmark, fell 1.1 per cent to $39.9 per barrel but later recovered to £40.
The pain was partially offset by oil strikes in Kuwait which crippled more than 60 per cent of its output. Supply of refined oil product from the country also tightened from scaled-back refinery runs and lower fuel exports.
"The material loss in production from the Kuwait strike has helped the oil market forget about the farce from Doha," Matt Smith, director of commodity research at the New York-headquartered Clipperdata, said.
The widely anticipated freeze deal was derailed by a bitter rivalry between Saudi Arabia and Iran. Saudi Arabia insisted an agreement couldn't be made without the recently sanction-free country, despite its determination to return its oil output to levels enjoyed before the US and EU embargo.
While the fallout could weigh on a fledgling recovery in oil prices, the market is unlikely to return to 12-year lows experienced earlier this year.
"Gradually declining non-Opec production as well as planned maintenance in the face of resilient oil demand in the first quarter have recently pointed to improving oil fundamentals," analysts at Goldman Sachs said in a note, referring to the first quarter.
Iran said today that other oil producers should continue talks to prop up oil prices, however the Opec rebel insisted that it was justified in not freezing its own output.
“We support cooperation between Opec and non-Opec member countries and efforts to bring stability to the oil market, and we urge all producers to continue their negotiations,” Iranian Opec governor Hossein Kazempour Ardebili told his oil ministry's Shana news agency.
But he also said Iran had made it clear that it wanted to regain its share of the oil market lost due to the sanctions, and that "its position is supported by most Opec and non-Opec members around the world".