By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices jumped more than 3 percent on Tuesday after a strike by workers in Kuwait nearly halved the OPEC member’s crude production, overshadowing bearish sentiment after 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.

Reports of power outages leading to output declines of about 200,000 bpd in Venezuela and a pipeline fire in Nigeria that may have cut production by 400,000 bpd, along with the upcoming refinery maintenance season boosted the rebalancing of market and was supporting prices, traders said.

“The Kuwait strike in particular is a major factor. It was a bolt out of the blue in terms of how much oil came off the market so quickly,” said John Kilduff, partner at Again Capital, a New York energy hedge fund.

“Usually these things have a ramp down period but this seems to be able to flick a switch…It’s supportive for the market for now”

Brent crude futures <LCOc1>, the global benchmark, traded at up $1.29 at $44.20 a barrel by 11:20 a.m. EST. U.S. crude futures <CLc1> rose $1.47 to $41.25 a barrel.

The rally was catalyzed by the S&P 500 index <.SPX> crossing a key level that triggered buying in oil and across commodities.

Analysts, however, said Kuwait’s disruption would likely be brief and investors would soon focus back 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 are 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 at the weekend meeting in Doha after Saudi Arabia demanded 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.

Tehran’s crude oil exports have risen to around 1.75 million bpd so far in April, according to an industry source and shipping data. Exports averaged about 1.6 million bpd in March

Other exporters who participated in the failed Doha talks have already shifted attention back to their own interests. Russia and Venezuela have indicated they hope to increase output this year.

(Additional reporting by Karolin Schaps in London and Henning Gloystein in Singapore; Editing by Marguerita Choy)