Hopes of economic stimulus amid the coronavirus outbreak helped oil prices to rebound on Tuesday and rise by 9 percent, recouping some of the massive losses from Monday, when prices had slumped in the worst rout since 1991.
At 12:25 p.m. CST on Tuesday, WTI Crude was surging 9.28 percent at $34.02 and Brent Crude was jumping 9.11 percent on the day to $37.49.
Oil prices bounced back on Tuesday after heavy sell-offs in the past two trading sessions, following the collapse of the OPEC+ agreement and the start of an all-out oil price war between Saudi Arabia and Russia, which analysts say will claim U.S. shale as the first collateral victim.
The price of oil slumped by 25 percent on Monday, after Saudi Arabia slashed its official selling prices (OSPs) to all markets and signaled an increase in production as of April, after Russia refused on Friday to back additional deeper cuts amid depressed global oil demand.
The price crash on Monday was the worst one-day plunge in oil prices since 1991.
The oil price collapse triggered massive selloffs in all equity markets on Monday, with the S&P 500 dropping 7 percent at open, triggering the circuit breakers for the first time since they were introduced in 2013. The S&P 500 ended up losing more than 7 percent on Monday and had its worst day since the 2008 financial crisis.
On Tuesday, the market panic subsided and some profit taking was also the reason for the rise in oil prices, but U.S. President Donald Trump's suggestions of a tax relief amid the coronavirus outbreak also helped the oil and equity markets. President Trump said on Monday that he would be discussing "a possible payroll tax cut or relief, substantial relief - very substantial relief," with House Republicans on Tuesday.
Analysts think that the Tuesday jump in prices would be short-lived as fundamentals remain bearish.
"Part of this strength likely reflects shorts taking profits, following the scale of the move yesterday," ING strategists Warren Patterson and Wenyu Yao said, commenting on Tuesday's price rise.
"Fundamentally the market remains bearish, producers are set to open the taps from 1 April, and this will push the market into deep surplus over 2Q20," ING's strategists said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More