Oil rose around two percent on Tuesday as a strike by oil workers in Kuwait nearly halved crude production from the OPEC member, overshadowing bearish sentiment following Sunday's failure by producers to agree to freeze output levels.
Thousands of Kuwaiti oil workers downed tools for a third day on Tuesday to protest against planned public sector pay reform, cutting crude output to 1.5 million barrels per day (bpd), according to an oil spokesman cited by news agency KUNA.
That is little more than half of Kuwait's average output of 2.8 million bpd in March.
"The Kuwaiti strike is supporting prices," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Brent crude futures, the global benchmark, traded at $43.72 a barrel at 1023 GMT, 81 cents, or 1.9 percent, above Monday's close. U.S. crude futures were up 64 cents, or 1.6 percent, at $40.42 a barrel.
However, analysts said Kuwait's disruption would likely be brief and investors would soon refocus on the market's oversupply given the failure of major exporters on Sunday to agree to freeze output to avoid worsening the glut.
"In the coming days oil production is likely to partially recover from its initial drop as non-striking staff is redistributed and inventories drawn upon, avoiding a force majeure on loadings," policy risk consultancy Eurasia Group said.
A deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday after Saudi Arabia demanded that Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices.
Iran has repeatedly said it would prioritize regaining pre-sanctions crude output levels over discussing an output freeze.
Iran's Deputy Oil Minister Rokneddin Javadi said on Tuesday crude production would reach that level by the end of the Iranian month of Khordad, which falls on June 20, according to state news agency IRNA.
Other exporters who participated in the failed Doha talks have already shifted attention back to their own interests.
Russia's Deputy Energy Minister Kirill Molodtsov said on Tuesday the country was considering raising oil production this year, possibly targeting a level of 540 million tonnes of crude. Russia produced 534 million tonnes last year.
OPEC member Venezuela said it hoped to raise oil exports this year to 2.3 million bpd.
Additional barrels threaten to boost a global supply glut that has brought prices to multi-year lows as 1-2 million barrels of crude are pumped every day in excess of demand.
(Additional reporting by Henning Gloystein in Singapore; editing by Jason Neely and David Evans)