Oil prices bounced nearly 7% today after a three-day selloff drove them to their lowest in almost two decades as demand plummeted due to the coronavirus and supplies surged in a fight for market share between Russia and Saudi Arabia.
Benchmark Brent, which has lost half its value in less than two weeks, got some respite as investors across financial markets assessed the impact of massive central bank stimulus measures.
Brent crude jumped $1.43, or 5.75%, to $26.33 a barrel this morning, after plunging to $24.52 yesterday to its lowest level since 2003.
US crude gained $2.40, or 11.8%, to $22.77 after dropping nearly 25% in the previous session to an 18-year low.
But analysts said gains were likely to be temporary, as tumbling demand was compounded by the collapse this month of a deal on supply curbs between OPEC and other producers.
The drop in demand, particularly in transportation, is also leading to a rapidly growing glut in refined products such as jet fuel and gasoline.
Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, kicked off a price war with Russia that sent prices into tailspin.
It is planning to keep pumping at a record rate of 12.3 million barrels per day (bpd) for months.
"From April 1, about 4 million bpd could flood the markets, potentially pushing down crude oil prices into the teens," Jefferies said in a note. "Unless somebody intervenes, no oil producer benefits from the current environment."
But analysts have still been slashing growth forecasts for China, where the disease erupted, to the lowest levels in decades.
In the US, where dozens of shale oil and gas drillers and services companies risk bankruptcy, senators have urged Saudi Arabia and Russia to stop the price war during talks with the kingdom's envoy to Washington.
The senators urged President Donald Trump to impose an embargo on oil from the two countries.
Meanwhile, the spread of the virus elsewhere is showing no sign of abating, with governments resorting to lockdowns in a bid to contain the disease, hammering economies and raising the prospect of a global recession.
Central banks have moved to mitigate the spiralling economic and financial fallout, with the European Central Bank kicking off a €750 billion euro emergency bond purchase scheme after an unscheduled meeting last night.