Oil futures rebounded in early Thursday trading as investors took heart from rescue measures by major economies, but the gains looked shaky ahead of rising volumes from Opec and other producers.
The sentiment was also aided by news that the coronavirus outbreak may finally be under control in China, where it originated, in a tribute to the success of communist authorities in tackling the pandemic.
Brent was up by more than 6% at around $26.50 per barrel in the early morning session. The global benchmark had plunged by 13% on Wednesday in frenzied selling triggered by the growing risk of the Covid-19 outbreak to the world economy.
US benchmark West Texas Intermediate (WTI) was changing hands at around $23.10 per barrel, up by over 13%.
China incidents down
China reported no new local infections on Thursday for the first time since the coronavirus struck in December, paralysing business in the world’s largest importer of oil.
The virus has killed 3245 people in China so far, making up over a third of the global toll.
Nonetheless, the disease is still claiming lives in China. Eight people died on Wednesday, all in Hubei, the province at the center of the outbreak.
The UK was bracing itself on Thursday for the virtual shutdown of London as many underground train stations across the metropolis closed.
As the outbreak expands in its relentless march across the globe, governments, businesses and investors are grappling with the biggest public health crisis since the 1918 influenza pandemic.
Major economies have intervened with unprecedented stimulus packages to soften the economic fallout from the virus.
Among the latest moves by a major central bank to try to mitigate the rising financial fallout from Covid-19, the European Central Bank kicked off an $820 billion emergency bond purchase scheme.
Japan is considering handing out cash to households as it faces the likelihood of a recession. Other countries such as South Korea and Australia are also taking similar action to mitigate the damage, joining the US, the UK, and Germany in unveiling rescue plans.
But the risk to the downside for the oil price is likely to increase next month when Saudi Arabia is expected to dump millions of extra barrels on to an already glutted market.
Other allies such as Abu Dhabi are following suit as an oil price war, triggered by the failure of talks in early March to convince Russia to join in further production cuts, enter the practical phase.
Saudi Arabia, the world’s largest oil exporter, says it is ready to continue the battle for years in its quest to grab market share from both Russia and US shale producers.