SINGAPORE - Oil prices rebounded to around $90 Tuesday in Asia after plunging to an 8-month low Monday on concerns a significant slowdown in global economic growth will undermine demand for crude.
"Prices have moved so far, so fast," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. "I certainly wouldn't say the bounce today is indicative that we've reached a bottom in oil prices."
Light, sweet crude for November delivery was up $2.05 to $89.89 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell overnight $6.07 to settle at $87.81, the lowest level since Feb. 6.
Prices have fallen about 40 percent since reaching a record at $147.27 on July 11.
Investor expectations about oil demand have turned completely around in the last three months as financial turmoil has sparked concern a recession could envelope the U.S. and Europe.
"Given the stresses and strains in the international financial system, the market is fearful of a severe international slowdown, especially in the developed countries," Moore said.
World stock markets plunged Monday amid growing investor anxiety that the U.S. debt crisis is enveloping Europe. Germany announced a bailout package Sunday totaling $69 billion for Hypo Real Estate, the country's second-biggest commercial property lender. Ireland, Iceland, Denmark and Greece moved quickly to guarantee bank deposits to ease consumer anxiety.
Investors are looking for signs that the Organization of Petroleum Exporting Countries may cut production if prices fall further. Iranian Oil Minister Gholam Hossien Nozari on Saturday called on fellow OPEC members not to pump too much oil in a bid to keep prices above $100.
However, OPEC may be reluctant to slash output since higher gasoline and heating costs would be a further drag on economic growth, Moore said.
"I think it's very difficult for OPEC," Moore said. "With the international economy looking weak, decisions to support oil prices have to be balanced against not making the situation worse."
A stronger dollar has also been weighing on oil prices. Investors tend to buy commodities like oil to defend against dollar weakness and a hedge against inflation, but sell crude as the U.S. currency strengthens.
The 15-nation euro gained to $1.3585 in trading Tuesday from 1.3516 on Monday while the dollar gained to 102.69 yen from 101.59.
In other Nymex trading, heating oil futures rose 5.86 cents to $2.53 a gallon, while gasoline prices gained 4.85 cents to $2.11 a gallon. Natural gas for November delivery rose 6.9 cents to $6.90 per 1,000 cubic feet.
In London, November Brent crude rose $1.96 to $85.64 a barrel on the ICE Futures exchange.