Oil steadied at $60 after falling over 2 percent a day ago as Asian equities perked up and the dollar rallied, raising hopes for an end to the financial market slump that dealers feared could hit oil demand.US crude rose by 2 cents to $60.09 a barrel by 0231 GMT, having slumped $1.57 on Monday to touch a two-week low of $59.55. London Brent crude was up 6 cents.
Asian shares rebounded slightly on Tuesday, with Tokyo's Nikkei average snapping a five-day losing streak to rise 0.8 per cent, providing some hope for investors that the worst of the pull-back may have run its course.
The US dollar also rebounded against the yen, rising more than 1 yen off of Monday's three-month low as the recovery in share prices encouraged traders to resume selling.
Oil markets initially proved immune to most of last week's stock market gyrations, rising every day but Friday, as a tightening US supply picture and the fear of disruption to Iran's exports countered the turmoil rocking other markets.
But they fell hard on Monday along with other riskier assets as the continued rise of the yen -- initially lifted by a flight from risk triggered by a fall in Chinese equities -- drove more speculators to unwind the carry trade that funded their bets. In addition to the shift in money flows, some traders feared the extended decline in stocks coupled with lacklustre US economic data and fears of defaults in the US subprime mortgage market threatened to crimp oil demand in the top consumer.
'Oil prices...(are) reflecting the concerns over weaker equities markets and the implications for the economic outlook,' Commonwealth Bank of Australia said in a daily report. 'A softening in international economic growth would also take a toll on oil demand.'
Oil traders are closely watching weekly oil data from the US government due out tomorrow as the expected drop in gasoline stocks may provide support to the market.
Industry analysts expect a 2.3-million- barrel draw in US distillates stocks and a 1.7-million-barrel decline in gasoline inventories. Crude oil stockpiles were forecast to have risen by 2.1 million barrels.
Ministers of Opec, which pumps about a third of global crude oil output, have said the group will not change its output levels after curbing exports by a total of 1.7 million barrels per day, if oil prices hold at current levels.
The group will meet on March 15.
Despite the recent retreat, oil prices remain near their highest in two months and well above their 20-month low in mid-January of under $50 a barrel.
Traders are also keeping a wary eye on Iran. UN ambassadors from major powers began negotiations on Monday on a resolution that would increase sanctions against Iran for its nuclear program but agreement still remained elusive. TradeArabia
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