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Oil prices up but economic worries weigh

20 september 2011, 18:16
Oil prices rebounded in Asian trade Tuesday after recent sharp falls, but sentiment remained weak as a downgrade by Standard & Poor's of Italy's sovereign debt rating added to market jitters, AFP reports.

New York's main contract, WTI light sweet crude for October delivery, turned higher to rise by four cents to $85.74 a barrel in the afternoon.

Brent North Sea crude for November climbed 21 cents to $109.35.

"The downgrade of Italy by S&P upset the markets a little bit," said Nick Trevethan, senior commodities strategist at ANZ Research in Singapore.

The US credit ratings firm on Monday cited economic, fiscal and political weaknesses in cutting Italy's sovereign debt rating to "A/A-1" from a "A+/A-1+".

S&P added that Italy's weak governing coalition would "limit the government's ability to respond decisively" to events.

The downgrade was more bad news for Italian Prime Minister Berlusconi and added to market nervousness already triggered by fears of a debt default by Greece.

Greece was to continue talks with the IMF and EU on Tuesday after being warned to tighten austerity measures and ramp up state asset sales to secure rescue funds and stave off bankruptcy early next month.

But heightened tensions between Athens and its bailout lenders, the European Union, European Central Bank and International Monetary Fund, have sparked concerns it could affect efforts to coordinate action to battle the crisis.

"The lack of agreement on fundamental issues is a major barrier to coordination of macroeconomic policy responses to the many threats to the global economy and financial system," said Julian Jessop, chief global economist at research house Capital Economics.

Other analysts said investors were also awaiting the results of a meeting this week of the US central bank's Federal Open Market Committee, which traders hope will announce fresh monetary loosening measures.

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