Oil bounces back from worst day in 29 years amid prospect of US tax-cut stimulus

REUTERS/Lee Celano

• Oil prices rebounded on Tuesday from steep losses on Monday, the worst day for the commodity since 1991, amid the coronavirus outbreak and an unexpected price war. 
• Brent crude, was up more than 10% to $37.84 per barrel in early trading in New York. West Texas Intermediate crude gained nearly 10%, to $34.13 per barrel.
• While the price war hasn’t abated, oil moved higher after President Trump again said he’d discuss stimulus to protect markets and the economy from the coronavirus outbreak. That could include a US payroll tax cut. 
• Watch oil trade live on Markets Insider. 
• Read more on Business Insider. 

Oil prices rose Tuesday, rebounding from the worst day since the Gulf War in 1991 on the potential that US tax cuts will cushion the economy amid the coronavirus outbreak and an oil price war. 

Brent crude, the international benchmark, was up more than 10% to $37.84 per barrel in Tuesday morning in New York. West Texas Intermediate crude gained nearly 10%, to $34.13 per barrel. Prices surged after President Trump again floated the idea of a “very substantial” payroll tax cut to provide economic stimulus. 

The commodity shook off pressure from the mounting price war that unfolded between OPEC and its allies over the weekend, when Saudi Arabia said that it would ramp up production after Russia rejected a plan to cut production to help the industry that’s also been hit by coronavirus as travel is halted. On Tuesday, both Russia and Saudi Arabia threatened to boost output. 

That sent oil prices plummeting on Monday, erasing nearly a quarter of their value in one day. Markets also declined sharply on Monday in the worst day for stocks since the 2008 financial crisis, and bond yields on safe haven assets sank to new lows as investors piled into the safe-haven currencies. 

While lower oil prices could be a good thing for consumers, the price war is a threat to US producers and economies that depend on oil. Energy stocks plunged Monday, and Saudi Aramco’s shares fell below their IPO price for the first time ever after the unexpected supply-demand shock. 

“If one were to look for a silver lining from an oil price crash that took as much as 30% from its valuation within moments of the market open for the week is that it should have helped the commodity to find its bottom,” said Jameel Ahmad, global head of currency strategy and market research at FXTM in a Tuesday note. 

Markets also regained some of their losses in early trading Monday, showing some investor confidence that a fiscal stimulus would protect against the impact of the coronavirus outbreak.