Following the breakdown of talks between Saudi Arabia and Russian Federation, the de facto leader of Opec announced plans to increase supply to a record 12.3 million barrels per day (bpd) and cut the official selling price for its oil by several dollars per barrel. According to him, according to statements by the Royal family of Saudi Arabia, they also do not conduct "price wars" - each country acts based on its budget parameters.
USA crude futures for April fell $2.83, or 11 percent, to $22.39 a barrel.
"A fair bit of short covering ensued after President Trump suggested he may tackle the oil crisis by brokering a deal between Moscow and Riyadh", Stephen Innes, chief market strategist at AxiCorp, said in a note. But they're in a fight, they're in a fight on price, they're in a fight on output.
The 24 per cent rise in crude oil prices on Thursday also pushed the Toronto Stock Exchange benchmark higher.
Oil is getting hit on both the supply and demand side. "We recognize the impact that COVID-19 is having on product demand", the company that operates the Colonial pipeline told customers. White House economic adviser Larry Kudlow said the government might take equity positions as part of corporate rescues. Italy's death count has surged to nearly 3,000, while the United Kingdom imposed tighter controls on movement of people including closing all schools.
Oil's respite came as investors across financial markets assessed the impact of massive central bank stimulus measures.
"Arguments that prices are already too low and positioning is extremely short are misplaced because what the market is experiencing now is unprecedented", said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd.
Taking a snapshot of how much oil consumption is collapsing is impossible, but privately traders put the drop somewhere between 10 million and 20 million barrels a day, with some saying it may be falling even more.
The higher supply is increasingly taking its toll on the oil market's structure.
Oil prices fell for a third session on Wednesday, with U.S. crude futures tumbling to an 18-year low and Brent hitting a more than 16-year low as travel and social lockdowns to counter the coronavirus raised prospect of the steepest ever annual fall in oil demand. On Thursday, a barrel of Permian oil was cheaper than a meal at a steakhouse in the region's Midland heartland, a sign that producers are struggling to cover their operating costs.