- Brent up as much as 4%, WTI up over 5% before retreating.
- Saudis expected to keep oil output high, capping gains.
- Measures to fight coronavirus hurting transport fuelÂ margins.
Oil rose more than $1 on Tuesday as bargain hunters emerged after recent sharp falls dueÂ to the coronavirus pandemic and the price war between SaudiÂ Arabia and Russia, but fears of a recession still dragged on theÂ market.
Brent crude was up by 3%, or 89 cents, to $30.94 aÂ barrel by 0746 GMT, after hitting a high of $31.25.
U.S. West Texas Intermediate (WTI) crude rose 4.7%,Â or $1.36, to $30.06, having come off a high of $30.21.
“Presumably, the market is getting supported by physicalÂ bargain hunters and short covering,” said Stephen Innes, chiefÂ markets strategist at AxiCorp.
The United States has said it will take advantage of low oilÂ prices to fill its Strategic Petroleum Reserve (SPR), and otherÂ countries and companies are planning similar measures to fillÂ storage tanks.
“But those storage facilities are rapidly filling. IfÂ storage does fill, quashing that demand, oil prices are sure toÂ collapse further, and the global markets will then have to hopeÂ that the dispute between Saudi Arabia and Russia is resolvedÂ before we reach that point of no return,” Innes said.
Amid heavy demand loss from the global spread of the virusÂ that causes COVID-19, Saudi Arabia and Russia started a priceÂ war after failing to agree to extend their pact to cut output toÂ support the market.
Saudi Aramco has said it would likely carry overÂ its planned higher oil output for April into May, and that itÂ was “very comfortable” with an oil price of $30 a barrel.
“Much focus is also falling on the Russians and Saudis, withÂ no expectations for either side to blink unless oil collapsesÂ towards the $15 region… If we see oil falls below the $20Â level, the Saudis may decide to come back to the negotiatingÂ table, however maybe just with OPEC and not the Russians,” saidÂ Edward Moya of Oanda.
Countries including the United States and Canada, andÂ nations in Europe and Asia, in the meantime are takingÂ unprecedented steps to contain the virus, severely cripplingÂ demand for crude and refined products including gasoline and jetÂ fuel.
Gasoline refining margins in the United States, the world’sÂ largest consumer of the motor fuel, plunged around 95% onÂ Monday, briefly turning negative, as people stayed off theÂ roads.
U.S. President Donald Trump on Monday said economicÂ disruptions from the spread of the coronavirus and measuresÂ taken against it could lead to a recession.
In Asia, margins for transportation fuels had also plungedÂ after more countries imposed travel restrictions and curbedÂ domestic movement as part of measures to slow the spread of theÂ coronavirus.