Oil prices rallied today following a torrid week due to the outbreak of coronavirus and the fallout of a huge price war.
The price of Brent Crude opened just over $30 a barrel this morning after falling to $26 yesterday.
But it then slipped back almost two per cent to $27.92.
World Texas Intermediate (WTI) sank five per cent to $24.65.
The rise was put down to a hint from US President Donald Trump that he could intervene in the oil prices war between Russia and Saudi Arabia.
Saudi Arabia flooded the market with cheap crude after Russia refused to countenance more production cuts to protect oil prices. The coronavirus outbreak has hurt oil demand badly amid global travel restrictions.
Trump has hinted he may intervene to protect the US shale industry.
Major stimulus measures announced from the world’s major economies also buoyed oil prices. As did the US purchasing oil for its strategic reserves.
This has been reflected in the share prices of major oil producers. BP and Shell were up two and four per cent respectively this afternoon.
However, as travel restrictions caused by coronavirus continues to depress demand for oil, this situation is unlikely to last, analysts warned.
“These are staggeringly low levels in both cases but at a time of global recession and an oil price war, what do we expect?” said Craig Erlam, senior market analyst at Oanda Europe.
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“I don’t expect a strong rebound in the near-term, with neither Russia or Saudi Arabia looking likely to blink, but we could now start to stabilise around these incredibly low levels,” Erlam added.
The current situation poses a risk for Russia and Saudi Arabia as both nations rely heavily on the resource.
They need the price to be $50 or $80 a barrel respectively to balance their budgets.
Oil was priced around $50 per barrel in February prior to the price war and the pandemic.