Oil prices rose over 5 per cent overnight, reversing an early fall to multi-year lows as hopes of a deeper cut in output by OPEC and stimulus from central banks countered worries about damage to demand from the coronavirus outbreak.
Brent crude futures gained $2.54, or 5.1 per cent, to $52.21 a barrel. The session low of $48.40 was its lowest since July 2017.
US West Texas Intermediate (WTI) crude futures rose $2.36, or 5.3 per cent, to $47.12 a barrel. The session low of $43.32 a barrel was the lowest since December 2018.
It was the first gain for both benchmarks after six sessions of losses triggered by worries about the coronavirus, which has killed nearly 3,000 people and roiled global markets.
Shares steadied globally on Monday. Last week, equities had their biggest rout since the 2008 financial crisis, which led markets to price in policy responses from the US Federal Reserve to the Bank of Japan, which indicated it would take steps to stabilise financial markets.
“There’s a growing sense that we’re going to see coordinated action by global central banks to try to offset the slowdown from the coronavirus,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “There’s also a growing sense that OPEC and Russia are going to get something done.”
Several members of the Organisation of the Petroleum Exporting Countries are mulling an additional production cut in the second quarter, with fears the virus outbreak will erode oil demand.
The previous proposal was for an additional output cut of 600,000 bpd.
Russian Energy Minister Alexander Novak said Moscow was evaluating a smaller oil production cut proposal made by OPEC+, adding it had not received a proposal for deeper cuts.
OPEC oil output fell in February to the lowest in over a decade as Libyan supply collapsed due to a blockade of ports and oilfields and Saudi Arabia and other Gulf members over delivered on a new production-limiting accord, a Reuters survey found.
Oil prices have fallen more than 20 per cent since the start of the year despite OPEC+ curbing output 1.7 million bpd under a deal that runs to the end of March.
“Inaction by OPEC+ would likely trigger another potentially severe bout of selling,” analysts at Fitch Solutions have said.
Data released over the weekend by China, the world’s top energy consumer, dragged on oil prices early in the session.
Factory activity in the country shrank at the fastest pace ever in February as the coronavirus hit the economy.