By David Hodari and Sarah Toy 

U.S. oil prices jumped 25% Thursday in their biggest one-day rally on record, lifted by investors' hopes that initial steps to end a global price war will offer a reprieve to an industry battered by coronavirus.

The gains capped a wild day of trading, in which an early climb accelerated after President Trump tweeted that he expected Russia and Saudi Arabia to agree to cut production by millions of barrels a day. Prices then soared as much as 35% before turning lower after the Kremlin denied talking to the Saudis. The climb then stabilized after Saudi officials said the kingdom would consider substantial output cuts as long as others in the G-20 group of nations were willing to join the effort.

While investors still expect the coronavirus crisis to deliver a heavy blow to global oil demand, Thursday's news offered a glimmer of hope that major producers can avoid a protracted conflict, lifting shares of beleaguered energy companies. Energy shares have been the best-performing group in the S&P 500 so far this week. On Thursday, shares of Exxon Mobil Corp. rose 7.6% and Chevron Corp. advanced 11%.

"This is a positive surprise for the market, but we're still a long way off from seeing actual material cuts," said Gary Ross, chief executive of Black Gold Investors LLC. "Demand is still being devastated."

U.S. crude oil closed up $5.01, or 25%, at $25.32 a barrel, logging its sharpest percentage gain on record, according to a Dow Jones Market Data analysis of figures going back to 1983. Brent crude, the global gauge of prices, rose $5.20, or 21%, to $29.94, also recording its best day ever in data going back to 1988.

The gains marked a rare bright spot for oil prices in recent weeks. Both Brent and U.S. crude are still down more than 50% so far this year, leaving many traders skeptical that production cuts alone can lift prices back near recent highs.

Capping traders' enthusiasm: oil storage is rapidly filling up while demand for fuel has plummeted, with swaths of the globe shutting down all but essential services in an effort to combat the spread of the coronavirus. Factories have closed and restaurants have shuttered. Airlines are scaling back on flights and people aren't driving. Many expect a deep recession world-wide. Investment banks and commodities trading houses have slashed their forecasts for daily global oil demand by tens of millions of barrels.

A truce between the Russians and Saudis would do little to shift those dynamics, many analysts said, and might even cause greater problems.

"It's physically impossible for Saudi Arabia and Russia to get 10 million barrels a day off the market -- they'd burst their onshore storage and fill every ship in sight," said Edward Marshall, a commodities trader at Global Risk Management. "Even with OPEC on board, that's a phenomenal amount of oil, and it'll be very difficult to get everyone on side."

The slide has hit energy companies hard, pushing many to the brink and dashing others' plans to restructure their operations. Shares of Exxon and ConocoPhillips have both shed more than 40% of their value so far in 2020. Earlier this week, U.S. shale driller Whiting Petroleum Corp. filed for bankruptcy protection, becoming the first sizable fracking company to succumb to the crash in oil prices.

Some other shale producers have asked Texas regulators to consider limiting the state's output for the first time in decades. Texas Railroad Commissioner Ryan Sitton said on Twitter late in Thursday's session that he had spoken with Russian energy minister Alexander Novak about coordinated cuts globally of 10 million barrels a day.

President Trump is set to meet Friday with the heads of some of the largest U.S. oil companies to discuss measures to help the industry as it fights for survival. The chief executives of Exxon and Chevron are expected to attend.

Investors were hopeful that Mr. Trump's tweets signaled a thaw in the price war, which began in early March, after the Saudi-led Organization of the Petroleum Exporting Countries and a group of other oil-producing countries dominated by Russia failed to deepen production cuts by 1.5 million barrels. But some analysts doubt that coordinated cuts of the size he described Thursday are even possible.

"It's highly unlikely these parties would agree to these cuts," said Spencer Welch, director of oil markets at IHS Markit. "It's not just [requiring] the Russians coming back and offering significantly more cuts than at the last OPEC+ meeting, but you've also got hundreds more producers across the U.S. needing to pass the legislation to enforce those cuts."

The two periods of the sharpest oil inventory builds in recent years were in early 2005 and early 2015, when stocks rose by around 400 million barrels, according to IHS Markit data. But currently IHS expects global oil inventories to rise by three times that amount in the first half of this year.

Fears that stockpiles will reach their limit in the coming months are another factor keeping some analysts cautious.

"There is some part of cautious optimism in me but it's deeply entangled with a potential economic recovery and the uncertainties around that," said Marwan Younes, chief investment officer at Massar Capital Management, a New York-based hedge fund.

--Amrith Ramkumar contributed to this article.

Write to David Hodari at David.Hodari@dowjones.com and Sarah Toy at sarah.toy@wsj.com

(END) Dow Jones Newswires

April 02, 2020 17:47 ET (21:47 GMT)