Oil prices extended gains on Tuesday on expectations that central banks are likely to enact financial stimulus to offset the impacts of the coronavirus outbreak and growing optimism that OPEC will order deeper output cuts this week.
Brent crude rose 56 cents per barrel, or 1.1 per cent, to $52.46 per barrel by 0756 GMT. US West Texas Intermediate (WTI) rose 71 cents, or 1.5 per cent, to $47.46 a barrel.
Both futures contracts rose by more than 3 per cent earlier in the session.
Brent and WTI have rebounded somewhat over the past two days from a more than 20 per cent drop from their 2020 peak in January that was caused by signs that the coronavirus spread has dented fuel demand.
“Oil prices got their groove back after the world's largest economies signalled they will be united in fighting off the economic impact of the coronavirus and on the Russian capitulation in agreeing to deliver deeper production cuts at this week's meeting,” said Edward Moya, senior market analyst at OANDA.
G7 finance ministers will also discuss this week how best to cushion the impact of the outbreak on economic growth, French Finance Minister Le Maire said on Monday. That is occurring as other major central banks have promised monetary and fiscal stimulus.
“Assuming the central banks come to the party this week, a substantial production cut by OPEC+ would set oil up to regain all the losses of the past week,” said Jeffrey Halley, senior market analyst at OANDA.
“Inaction by either, or both, should see oil retesting its recent lows by the week's end,” said Halley.
The coronavirus, which originated in China, has spread to more than 60 countries and has killed over 3,000 people globally.
“The coronavirus is still spreading globally and until markets can possibly calculate a return of normal travel and trade, oil will struggle,” Moya said.
With lingering worries over oil demand amid the virus outbreak, several key members of the Organization of the Petroleum Exporting Countries (OPEC) are mulling a bigger oil output cut of possibly 1 million barrels per day (bpd). The previous proposal was for an additional reduction of 600,000 bpd.
OPEC and its allies, a group known as OPEC+, are expected to announce deeper output cuts at their meeting on March 5-6 in Vienna. The group had agreed to cut output by 1.7 million bpd in a deal that runs to the end of March.
Singapore-based analyst Margaret Yang at CMC Markets said the gradual resumption of business activities in China has also supported oil prices.
Oil stockpiles in the United States, the world's biggest crude producer and consumer, are expected to rise for a sixth week by 3.3 million barrels, while refined product inventories are forecast to fall, according to Reuters poll.