Oil prices rose more than 10% on Thursday after a three-day sell off drove them to their lowest levels 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, was offered some respite as investors across financial markets assessed the impact of massive central bank stimulus.
Brent crude jumped $1.29, or 5.1%, to $26.16 per barrel, after plunging to $24.52 on Wednesday, its lowest level since 2003.
U.S. crude gained $2.63, or 12.9%, to trade at $23.00 per barrel, 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 due to the coronavirus outbreak was compounded by the collapse this month of a deal on supply curbs between OPEC and other producers.
Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, which kicked off a price war with Russia that sent prices into tailspin, 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."
U.S. senators on Wednesday upped the pressure on Saudi Arabia and Russia to stop the price war and held talks with the kingdom's envoy to Washington. They urged President Donald Trump to impose an embargo on oil from the two countries.
Algeria's energy minister said on Wednesday there were "positive signals" from China, the world's biggest crude importer, in its efforts to control the spread of the coronavirus.
But analysts have still been slashing growth forecasts for China, where the disease erupted, to the lowest levels in decades.
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 prospects for a global recession.
Central banks have moved to mitigate the spiraling economic and financial fallout from the epidemic, with the European Central Bank kicking off a 750 billion euro ($820 billion) emergency bond purchase scheme after an unscheduled meeting on Wednesday.
"Monetary and fiscal stimulus will do little in returning energy demand back to normal but it will build confidence that the global economy will be in a better position once it is behind the virus," said Edward Moya, senior market analyst at OANDA in New York.