Oil prices rebound from heavy falls
Oil prices rebounded on Tuesday from recent sharp falls, in line with encouraging gains on equity markets, as investors set aside news of Italy's sovereign debt rating downgrade.
New York's main contract, light sweet crude for delivery in October, jumped $1.26 to $86.96 a barrel.
Brent North Sea oil for November leapt $1.64 to $110.78 a barrel in late afternoon London deals.
"Crude oil prices rebounded strongly on Tuesday, in a correction higher, as general market sentiment improved," said Sucden analyst Myrto Sokou.
"The upside momentum in the global equity markets provided further support.
"However, the economic and political conditions across eurozone look fairly tentative at the moment, so investors should remain cautious as recent gains might be short-lived."
Talks on Greek debt rescue funds dragged into a second day on Tuesday over tough EU-IMF terms.
Greek Finance Minister Evangelos Venizelos was to hold a conference call with head auditors from the European Union, the International Monetary Fund and the European Central Bank at 1700 GMT.
"The conclusion of the second round of the conference call between Greek and EU/IMF leaders this evening might be quite crucial for the country's economy and the global economic conditions," added Sokou.
Athens is under pressure to tighten austerity and speed up asset sales to unlock loan funds before its money runs out next month.
European stock markets rallied in nervous trading on Tuesday, as equity investors also brushed aside Italy's rating downgrade to focus on the US Federal Reserve's monetary policy meeting.
Standard & Poor's has downgraded Italy's sovereign debt assessment, citing economic, fiscal and political weaknesses in a fresh blow to Silvio Berlusconi's fragile coalition government.
The rating agency said it had downgraded Italian debt to "A/A-1" from a "A+/A-1+" grade because of "Italy's weakening economic growth prospects."
The news comes at a highly sensitive moment in the eurozone debt drama, which has so far witnessed enormous bailouts for debt-ravaged Greece, Ireland and Portugal.
Many analysts say that Italy and Spain could be the next dominoes to fall in the fast-moving crisis.
Oil prices had slumped Monday on concern that Greece was on the brink of default, while the market was also rocked by the ongoing political feud over deficit reduction in the United States.
Markets were looking ahead to a meeting of the Federal Open Market Committee, the key policy body of the US Federal Reserve, to see whether it takes action to boost the ailing American economy. The FOMC begins its two-day meeting Tuesday.
© 2011 AFP