Oil prices jumped by around 10% on Tuesday a day after the biggest rout in nearly 30 years as investors eyed the possibility of economic stimulus and Russia signalled that talks with OPEC remained possible.
U.S. President Donald Trump on Monday said he will be taking "major" steps to gird the U.S. economy against the impact of the spreading coronavirus outbreak, while Japan's government plans to spend more than $4 billion in a second package of steps to cope with the virus.
Brent crude futures were up $3.36, nearly 10%, to $37.72 a barrel by 1041 GMT, after hitting a session high of $37.75 a barrel.
West Texas Intermediate (WTI) crude gained $3.14, or around 10%, to $34.27 a barrel, after hitting a high of $34.42.
Both benchmarks plunged 25% on Monday, dropping to their lowest levels since February 2016 and recording their biggest one-day percentage declines since Jan. 17, 1991, when oil prices fell at the outset of the first Gulf War.
Trading volumes in the front-month for both contracts hit record highs in the previous session after three years of cooperation between Saudi Arabia and Russia and other major oil producers to limit supply fell apart on Friday, triggering a price war for market share.
Saudi, the world's biggest oil exporter, escalated tensions with plans to supply 12.3 million barrels per day (bpd) in April, well above current production levels of 9.7 million bpd, Saudi Aramco CEO Amin Nasser said on Tuesday.
April's crude supply will be "300,000 barrels per day over the company's maximum sustained capacity of 12 million bpd," Nasser said in a statement received by Reuters.
Price pared gains by over a $1 on the news.
Russian oil minister Alexander Novak said he did not rule out joint measures with OPEC to stabilise the market, adding that the next OPEC+ meeting was planned for May-June.
But in response, Saudi Arabia's energy minister told Reuters he did not see a need to hold an OPEC+ meeting in May-June if there was no agreement on what measures should be taken to deal with the impact of the coronavirus on oil demand and prices.
"I fail to see the wisdom for holding meetings in May-June that would only demonstrate our failure in attending to what we should have done in a crisis like this and taking the necessary measures," Prince Abdulaziz bin Salman said.
"Price wars and pandemics are nothing new to the commodity markets, but both occurring simultaneously is something we have yet to witness in our careers," RBC analysts said in a note.
"Such action will test the market's self-balancing mechanism absent the backstop of OPEC, a mechanism that has not been tested since the U.S. shale boom was in its infancy," they added.
Sentiment was also lifted after Chinese President Xi Jinping visited Wuhan, the epicentre of the coronavirus outbreak, for the first time since the epidemic began, and as the spread of the virus in mainland China slows sharply.
China, the world's second-largest oil consumer, is trying to get people in hard-hit Hubei province back to work by using a mobile phone-based monitoring system that will allow people to travel within the province.
Crude was also supported by hopes for a settlement to the price war and potential U.S. output cuts, although analysts warned gains may be temporary as oil demand continues to be hit by the virus outbreak, which has spread beyond China and prompted Italy to implement a nationwide lockdown.
U.S. shale producers rushed to deepen spending cuts and could reduce production after OPEC's decision to pump full bore into a global market hit by shrinking demand.
"When you look at the leverage the industry is in, at prices of around $30, it's not profitable," said Jonathan Barratt, chief investment officer Probis Group.