NEW YORK: Oil rebounded on Tuesday as investors bought at bargain levels after prices plunged to four-year lows as governments worldwide ramped up measures to contain the spread of the deadly coronavirus.
Analysts said, however, that any recovery in oil prices is likely to be short-lived as travel restrictions and other tough measures rolled out to fight the virus sap demand amid a production glut and price war. US benchmark West Texas Intermediate (WTI) was trading at $30.00 a barrel, up 4.53 percent, at around 0120 GMT.
International benchmark Brent was up 2.96 percent at $30.94 after crashing more than 10 percent overnight to below $30 a barrel for the first time in four years. “Presumably, the market is getting supported by physical bargain hunters, but those storage facilities are rapidly filling,” said AxiCorp global chief market strategist Stephen Innes.
But “if storage does fill, quashing that demand, oil prices are sure to collapse further”, he said in a note. “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.”
Last week’s price war began after OPEC kingpin Saudi Arabia pushed an informal alliance of major crude producers to slash output to combat the impact of the virus outbreak on prices. But alliance partner and non-OPEC member Russia, the world’s second-biggest oil producer, refused — prompting Riyadh to drive through massive price cuts and pledge to boost production.
“While demand is likely to be hit hard, the market is also facing a surge in supply,” ANZ Bank said in a commentary. As well as restricting travel, many governments worldwide have shut down schools, large gatherings and non-essential businesses in a bid to contain the spread of the virus.