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Update: Oil prices nudge up on short-covering; glut, economy concerns persist

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Oil prices rebounded in Asian trade on Tuesday as traders covered short positions after prices fell at least 3 per cent in the previous session, but gains were capped by worries about oversupply and the health of the global economy.

[SINGAPORE] Oil prices rebounded in Asian trade on Tuesday as traders covered short positions after prices fell at least 3 per cent in the previous session, but gains were capped by worries about oversupply and the health of the global economy.

Brent crude for December delivery had climbed 11 cents to US$48.72 a barrel by 0329 GMT after settling down US$1.85, or 3.7 percent, in the previous session.

US crude for November delivery rose 13 cents to US$46.02 after closing down US$1.37, or 3 per cent. The November contract expires on Tuesday. "Short-covering has led to a little bit of a rally," said Ben Le Brun, market analyst at Sydney's OptionsXpress.

But worries over Iran boosting crude production when international sanctions are lifted and weaker economic growth in China, the world's second-largest economy, weighed on markets, Le Brun said. "The fundamentals remain a little bit stressed," he added.

Iran plans to increase crude production by 500,000 barrels per day within a week of the lifting of sanctions, a senior Iranian oil official was quoted as saying on Monday, selling the oil to traditional customers in Asia and Europe.

China's GDP growth slowed to 6.9 per cent in the third quarter, down on a 7 per cent rise in the prior quarter, while implied oil demand was also lower, official figures and Reuters data on Monday showed.

That came as US crude stocks likely rose for a fourth straight week, climbing last week by 3.7 million barrels to 472.3 million barrels, a preliminary Reuters survey taken ahead of weekly industry and official data showed on Monday.

Investors had already priced in the likely rise in oil inventories last week, said Vyanne Lai, an analyst at National Australia Bank in Melbourne. "The market consensus is a 3.5-million barrel increase which is hardly surprising given seasonal production," she said.

Industry group, the American Petroleum Institute (API) will report its stocks data later on Tuesday, while the US Department of Energy's Energy Information Administration (EIA) will release oil inventory data on Wednesday.

Investors are also keeping an eye on the outcome of a technical meeting of oil experts from the Organization of Petroleum Exporting Countries and non-OPEC countries on Wednesday, as well as a European Central Bank meeting and manufacturing data from China later this week.

Discussions at the oil experts meeting is likely to focus on possible financial aid for OPEC members hit by falling oil prices rather than production cuts, Lai said.

Thursday's ECB meeting, set against a background of lower consumer spending, could result in a further round of stimulus and asset purchases.

REUTERS