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By Devika Krishna Kumar
NEW YORK (Reuters) - Oil prices jumped about 2% on Wednesday on media reports that suggested scientists were developing a vaccine for the fast-spreading coronavirus, even as world health experts said treatments have not yet been found.
Also supporting oil was news that the Organization of the Petroleum Exporting Countries (OPEC) and its producer allies were considering further output cuts to counter a potential squeeze on global oil demand.
The outbreak has killed nearly 500 people and is weighing on global economic activity and oil demand.
The World Health Organization played down the media reports, saying there were "no known effective therapeutics" against the virus.
Brent crude oil futures <LCOc1> ended the session up $1.32, or 2.5%, at $56.46 a barrel while U.S. West Texas Intermediate (WTI) crude <CLc1> gained $1.14, or 2.3%, to settle at $50.75. Both contracts rose more than 4% during the session.
Prices held gains after data showed U.S. crude inventories <USOILC=ECI> rose by 3.4 million barrels in the week to Jan. 31, compared with expectations in a Reuters poll for a rise of 2.8 million barrels.
"The report probably had nothing shocking enough to ruin the momentum of the big crude comeback that we are seeing today," said Phil Flynn, an analyst at Price Futures Group in Chicago.
"The main reason oil sold off as hard as it did wasn't because of what we knew; it was what we didn't know. Now, it seems like we can quantify the demand destruction and look ahead."
China's Changjiang Daily newspaper reported on Tuesday that a team of researchers led by Zhejiang University Professor Li Lanjuan had found that drugs Abidol and Darunavir can inhibit the virus in vitro cell experiments.
Separately, Sky News reported that a British scientist has made a significant breakthrough in the race for a vaccine by reducing part of the normal development time from two to three years to only 14 days.
Still, refineries including China's Sinopec, Asia's top refiner, have slashed throughput as the virus cuts demand for refined fuels.
Fears of a slump in global oil demand had pushed U.S. crude and Brent futures into contango this week - a structure in which longer-dated oil futures trade at a premium that encourages traders to keep crude in storage for more profitable resale in the future.
"Based on our forecast that China's GDP growth will slow to just 3% year-over-year in Q1 2020 and assuming that the virus is brought under control relatively quickly, we have tentatively penciled in a 10% drop in the country's oil consumption in Q1," Capital Economics analysts said in a note on Wednesday. "This pushes the global market into a small surplus in the first half of 2020."