SINGAPORE (AFP) - Oil prices rebounded in Asian trade Friday following a dramatic turnaround in US stocks amid a global equities turmoil whipped-up by a crisis in the US subprime credit market, dealers said.
Investors are closely watching how the default problems in low-quality US housing loans will affect the US and other global economies and how this would impact on oil demand, they said.
At 10:40 am (0240 GMT), New York's main contract, light sweet crude for September delivery, was up 59 cents to 71.59 US dollars a barrel from 71.00 dollars in late US trades Thursday.
Brent North Sea crude for September delivery advanced 21 cents to 69.98 dollars.
The New York contract had dropped 2.33 dollars, while Brent had fallen 2.22 dollars overnight.
"I think the price rise is consistent with the movement in the equities markets," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Getz.
US stocks mounted a dramatic recovery to pare back steep losses Thursday, with the Dow Jones Industrial Average closing down a slight 0.12 percent at 12,845.78 after earlier sliding over 320 points below 12,600.
The tech-rich Nasdaq finished down 0.32 percent, while the broad-market Standard & Poor's 500 index gained 0.32 percent.
Some Asian stock markets opened higher or narrowed down declines on Friday.
Shum said the recent drop in oil prices was due to hedge funds pulling out to look for less risky investments, adding that much would depend on how global economies will be affected by the US-induced credit squeeze.
"It depends on how serious the US housing market problems are and how the credit tightness problems are," he said.
"It's too early to tell how serious the US problems are... but the economic data outside of the housing market says the state of the economy is healthy.
"So far, the global economy also remains quite healthy, and so we have to wait and see how serious the US problem is."
If the impact of the US credit woes is limited, hedge funds are expected to return to the oil markets.
"The fundamentals in the oil market remain supportive of strong prices," Shum said.
The Organisation of Petroleum Exporting Countries (OPEC) is expected to keep production at current levels during its meeting next month in Vienna, Shum added.
With the United States currently in its peak hurricane season, weather is also a "wild card" as the storms could threaten oil production facilities in the Gulf of Mexico region, he said.
"We'll see how this credit squeeze shakes out and how it will affect the state of the US economy," he said.
"If these problems are perceived not to be serious and they won't affect the US economy, and the global economy as well, then the pullback in oil prices will be seen as a buying opportunity because oil fundamentals remain supportive of strong prices."