Oil prices jump $1 as sharp falls draw investors, bargain buyers
Saudi Arabia and Russia started a price war after failing to agree to extend their pact to cut output to support the market
Oil rose more than $1 on Tuesday as bargain hunters emerged after recent sharp falls due to the coronavirus pandemic and the price war between Saudi Arabia and Russia, but fears of a recession still dragged on the market.
Brent crude was up by 1.8%, or 55 cents, to $30.60 a barrel by 0410 GMT, after hitting a high of $31.25.
US West Texas Intermediate (WTI) crude rose 3.7%, or $1.06, to $29.76, having come off a high of $30.21.
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"Presumably, the market is getting supported by physical bargain hunters and short covering," said Stephen Innes, chief markets strategist at AxiCorp.
The United States has said it will take advantage of low oil prices to fill its Strategic Petroleum Reserve (SPR), and other countries and companies are planning similar measures to fill storage tanks.
"But those storage facilities are rapidly filling. If storage does fill, quashing that demand, oil prices are sure to collapse further, and the global markets will then have to hope that the dispute between Saudi Arabia and Russia is resolved before we reach that point of no return," Innes said.
Amid heavy demand loss from the global spread of the virus that causes COVID-19, Saudi Arabia and Russia started a price war after failing to agree to extend their pact to cut output to support the market.
Saudi Aramco has said it would likely carry over its planned higher oil output for April into May, and that it was "very comfortable" with an oil price of $30 a barrel.
"A deeply imbalanced supply and demand outlook has not changed as Saudi and Russia have ramped up production in a time when global energy demand is badly hurt by border controls and travel bans," said Margaret Yang of CMC Markets.
Countries including the United States and Canada, and nations in Europe and Asia, are taking unprecedented steps to contain the virus, severely crippling demand for crude and refined products including gasoline and jet fuel.
Gasoline refining margins in the United States, the world's largest consumer of the motor fuel, plunged around 95% on Monday, briefly turning negative, as people stayed off the roads.
US President Donald Trump on Monday said economic disruptions from the spread of the coronavirus and measures taken against it could lead to a recession.
In Asia, margins for transportation fuels also plunged to multi-year or multi-month lows after more countries imposed travel restrictions and curbed domestic movements as part of measures to slow down spread of the coronavirus.
