Oil rose on Tuesday as investors snapped up bargains after crude benchmarks dropped almost 4% in the previous session, but fears that the spreading coronavirus could wreak far greater economic damage than initially thought capped gains.
Brent crude rose 29 cents, or 0.5%, to $56.59 a barrel by 0212 GMT, after slipping 3.8% on Monday, the largest single-day price fall since Feb. 3. U.S. crude futures climbed 22 cents, or 0.4%, to $51.65, recovering from a 3.7% drop in the previous session.
"WTI has regained some ground as investors looked for bargains and as the (U.S.) benchmark slipped neared a key support level of $50 per barrel," said Satoru Yoshida, a commodity analyst with Rakuten Securities.
Demand concerns savaged prices for oil and a whole swathe of industrial commodities on Monday while both U.S. and European equities suffered their steepest losses since mid-2016.
"Fears that the rapidly-spreading coronavirus outside of China could lead to a bigger-than-anticipated impact on global economy and oil demand will likely keep weighing on market sentiment," Yoshida said.
The coronavirus death toll climbed to seven in Italy on Monday and several Middle East countries were dealing with their first infections, sending markets into a tailspin.
The coronavirus outbreak can still be beaten, the World Health Organization said on Monday, insisting it was premature to declare it a pandemic even though it had the potential to reach that level.
Asian shares extended losses on Tuesday amid fears the coronavirus was mutating into a pandemic that could cripple global supply chains and damage economies far more than initially expected.
Saudi Aramco expects the coronavirus impact on oil demand to be short-lived, however, and for consumption to rise in the second half of the year, Chief Executive Amin Nasser told Reuters on Monday.
In the United States, crude oil inventories were seen building for the fifth straight week, while refined products likely fell last week, a preliminary Reuters poll showed on Monday.