Kuwait's state oil firm said on Wednesday it expects to restore full production within three days after workers ended a strike in a surprise about-turn that triggered a renewed slide in world prices.

The walkout by thousands of staff of Kuwait Petroleum Corp (KPC) and its subsidiaries on Sunday in a dispute over planned pay cuts had slashed the emirate's output from 3.0mn barrels per day to 1.5mn and prompted a brief rally in world prices.

But early on Wednesday the Kuwait Oil Workers Union announced its members were returning to work after what it called an "extremely successful" strike that had made the government pay attention to their concerns.

Staff were already returning to work in response to the union's call, KPC said, adding that operations at its installations were resuming.

Company spokesman Sheikh Talal Khaled al-Sabah said a gradual return to normal production of 3.0mn bpd "would take around three days".

The union's surprise announcement, which came just hours after its leaders had vowed to continue the strike until all their demands were met, quashed hopes the disruption could help ease a persistent supply glut and saw oil shed nearly a dollar on world markets.

Around 1100 GMT, US benchmark West Texas Intermediate for delivery in May was down 91 cents at $40.17 a barrel, and Brent North Sea crude for June delivery fell 70 cents to $43.32.

Prices "are coming under pressure again... after oil workers in Kuwait agreed to end their strike against wage and job cuts and work to return output to pre-strike levels", said analyst Craig Erlam at trading firm Oanda.

The climbdown by the union came after an appeal by acting oil minister Anas al-Saleh on Tuesday night for staff to return to work so that negotiations could be held on their demands.

"We cannot sit at the negotiating table while the strike is still going on. Return to work and come and negotiate," he told the private Al-Rai satellite television.

Prime Minister Sheikh Jaber Mubarak al-Sabah met on Wednesday with the union's leaders after they called off the strike.

They discussed "the negative impact of the strike and halting production at the vital oil facilities in addition to losses" caused by the industrial action, said an official statement.

The premier said the government would fully respect any right for employees under the law but it was not possible to "respond to any demands under the pressure of work stoppage and disruption to vital interests," said the statement quoted by the official Kuna news agency.

Union demands  

The union has yet to comment on the talks.

The workers' demands include dropping plans to cut some benefits in the face of falling oil prices and excluding the sector from a new payroll scheme for public employees.

Saleh, who is also finance minister, said the government had not yet implemented any decision regarding oil workers' pay.

The prime minister said KPC did not plan to cut its workers' wages or their end of service indemnities.

But he added that the company had decided to reduce future pay rises in line with spending cuts adopted in other state organisations.

He said that average monthly pay for oil sector staff in Kuwait was around $22,000, compared with about $4,200 for civil servants.

Saleh said that KPC planned to cut the annual pay rise received by its staff from 7.5% of their basic salary to 5.0%.

Kuwait posted budget windfalls for 16 consecutive fiscal years due to high oil prices but posted a budget deficit in the 2015/2016 year which ended March 31.

For the 2016-17 fiscal year, it projects a record deficit of $38bn, equivalent to 30% of gross domestic product.

Kuwait has liberalised the price of diesel and kerosene and is considering cutting subsidies on other services.

But it is facing difficulties in cutting spending which has increased more than fourfold since 2006, mostly on wages and subsidies.

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