Oil prices jump over $1 as sharp falls draw bargain buyers

Oil rose more than $1 on Tuesday as bargain hunters emerged after recent sharp falls due to the coronavirus pandemic and the price war between Saudi Arabia and Russia, but fears of a recession still dragged on the market. Brent crude was up by 3%, or 89 cents, to $30.94 a barrel by 0746 GMT, after hitting a high of $31.25. U.S. West Texas Intermediate (WTI) crude rose 4.7%, or $1.36, to $30.06, having come off a high of $30.21.

“Presumably, the market is getting supported by physical bargain hunters and short covering,” said Stephen Innes, chief markets strategist at AxiCorp. The United States has said it will take advantage of low oil prices to fill its Strategic Petroleum Reserve (SPR), and other countries and companies are planning similar measures to fill storage tanks.

“But those storage facilities are rapidly filling. If storage does fill, quashing that demand, oil prices are sure to collapse further, and 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,” Innes said. Amid heavy demand loss from the global spread of the virus that causes COVID-19, Saudi Arabia and Russia started a price war after failing to agree to extend their pact to cut output to support the market.

Countries including the United States and Canada, and nations in Europe and Asia, in the meantime are taking unprecedented steps to contain the virus, severely crippling demand for crude and refined products including gasoline and jet fuel.

Oil prices jump over $1 as sharp falls draw bargain buyers, Reuters, Mar 17