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Oil picks up after rout, but US crude still below US$40
[NEW YORK] Oil prices recovered some lost ground Tuesday after a sharp fall sparked by worries about China's faltering economy, the world's largest energy consumer.
US benchmark West Texas Intermediate (WTI) for October delivery rose US$1.07 to US$39.31 a barrel on the New York Mercantile Exchange, after finishing below US$40 on Monday for the first time in six years.
In London, Brent North Sea crude for October, the international benchmark, finished at US$43.21 a barrel, up a modest 52 cents, a day after dropping to its lowest level since March 2009.
"Although we are getting a solid rebound thus far today, there still appears to be a strong tilt towards bearish sentiment from a bigger-picture perspective," said Matt Smith, head of commodity research at US firm ClipperData.
Mr Smith said the market remained focused on the robust production of the Organisation of the Petroleum Exporting Countries, in particular cartel kingpin Saudi Arabia, and of the United States.
Opec's decision last November to not cut production in the face of declining prices was seen as Saudi Arabia's bid for market share. And US producers have also refused to cut back in the face of low prices.
"Given the rise in production in the last year from Saudi, and the lack of response by US production... an increasing number of voices are joining the chorus to question whether Saudi's tactics may have been misguided," Mr Smith said.
Traders were looking ahead to Wednesday's weekly report on US petroleum inventories from the Department of Energy.
"Most people are looking for a build of two million (barrels) in crude oil storage numbers," said Bob Yawger of Mizuho Securities.
An unexpected increase in crude stockpiles last week contributed in the WTI fall toward US$40, he said.
"At least, we're expecting this number this time, and I'm not sure we'll get the same kind of effect if we actually get a build, even if there will definitely be pressure on the market."