Prices of oil rallied more than 8 percent late Tuesday, recovering from the biggest slump in almost three decades, as the possibility of economic boost, raised buying and US producers cut spending in efforts that could reduce output.
Brent crude futures were up $1.44, or almost 4 percent to $38.66 per barrel, while US West Texas Intermediate crude climbed $1.12 or 3.4 percent to $35.48 per barrel, after an increase of more than 8 percent the previous day.
Expectations that shale oil refiners will need to cut their production helped ease market sentiment, Satoru Yoshida, a commodity planner at Rakuten Securities, said.
US President Donald Trump vowed new measures to cushion the US economy against the negative effects of the coronavirus. Japan's government disclosed it was considering allocating over $4 billion in a second tranche of steps to manage the outbreak. US shale companies, including Occidental Petroleum Corp, raised expenditure cuts that could trim output.
On Tuesday after the pummeling of the previous day, the oil and equity markets had experienced powerful rallies, backed by signs of coordinated action by the world's largest economies to buffer the economic impact of the coronavirus outbreak.
But increasing doubts about Washington's stimulus package to combat the coronavirus outbreak on Wednesday knocked out the momentum from an earlier rally in Asian shares.
Volumes for both contracts in the front-month were below record highs seen on Monday, when volumes soared after Saudi Arabia, Russia and other major oil producers ended three years of cooperation to limit supply and began a price war for market share.
According to Saudi Aramco chief executive officer Amin Nasser, Saudi, the world's largest oil exporter, has increased tensions with plans to produce 12.3 million barrels per day (bpd) in April, well above current production rates of 9.7 million bpd.
Russian oil minister Alexander Novak said on Tuesday that he did not rule out joint market stabilization steps with OPEC, adding that the next OPEC+ meeting was scheduled for May-June.
Saudi Arabia's energy minister told Reuters that if there was no consensus on measures to deal with Russia's indifference - and the coronavirus' effects on oil demand and prices - he did not see a need for the conference.
Stockpiles of US crude oil have increased in the latest week, while stocks of gasoline and distillate have fallen, data from the American Petroleum Institute's industry group showed on Tuesday.
Crude prices have drawn some support from this, but analysts predict that global demand for oil will continue to slow during the epidemic, which has spread beyond China and prompted other countries to introduce a lockdown.
