World oil prices hit multi-month lows on Tuesday, hit by global economic fears, but rebounded in afternoon deals as investors eyed recovering stock markets ahead of a US interest rate decision.
In early deals, New York's main contract, West Texas Intermediate light, sweet crude for delivery in September, plunged in Asian deals to $75.71 a barrel -- the lowest level since September 29, 2010.
And Brent North Sea crude for September dived as low as $98.74 a barrel, hitting a level last seen on February 8.
However, in late afternoon London deals, Brent oil stood at $104.62 per barrel, up 88 cents from Monday's closing level. New York crude wiped out its losses to trade at $82.08, up 78 cents.
"Crude oil fell back initially, dropping below $80 a barrel for the first time in 10 months before rebounding on the back of stronger equity markets," said CMC Markets analyst Michael Hewson.
"Higher than expected Chinese inflation and lower than expected industrial output continues to weigh on demand, though prices have recovered.
"Brent prices also slipped below the $100 mark before rebounding as well," he added.
Prices had plunged on fears of slowing energy demand in China and the United States, and as the OPEC cartel slashed its global consumption forecasts.
The energy market has been badly hit in recent days by the eurozone debt crisis, Washington's loss of its AAA credit rating and faltering global growth.
Standard & Poor's announced last Friday that it was cutting Washington's long-term sovereign debt rating from AAA to AA+.
"The market has become unpredictable since the US downgrade as people are trading based on fear and a need to get out of positions quickly," added Inenco analyst Emma Pinnock.
China meanwhile revealed on Tuesday that the nation's inflation rate hit 6.5% in July, the highest level for more than three years.
The news has sparked intense concern about monetary tightening and fresh instability in the Chinese economy at a time of renewed global financial turmoil.
Crude futures had already tumbled on Monday as the unprecedented downgrade of the United States's credit rating shook financial markets and sparked fears of slowing global energy demand.
Against this gloomy backdrop, the OPEC oil cartel -- whose 12 member nations pump about 40% of global oil supplies -- downgraded its global crude demand forecasts on Tuesday.
The Organization of Petroleum Exporting Countries lowered its official predictions for 2011 and 2012 crude oil demand, citing concerns for the economic health of developed countries.
The cartel forecast in its monthly report that demand for crude was expected to reach 88.14 million barrels per day (mbd) in 2011, down from a previous estimate of 88.18. For 2012, it put the figure at 89.44 mbd, down from 89.50 mbd.