Oil prices rebound, but Italy downgrade weighs

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LONDON: Oil prices rebounded on Tuesday from recent sharp falls, but sentiment remained weak after Italy was slapped with a sovereign debt rating downgrade, and before the US Federal Reserve's latest meeting.

New York's main contract, light sweet crude for delivery in October, added $1.08 to $86.78 a barrel. Brent North Sea oil for November rose $1.46 to $110.60 a barrel in late morning London deals.

Standard & Poor's downgraded Italy's sovereign debt assessment, citing economic, fiscal and political weaknesses in a fresh blow to Silvio Berlusconi's fragile coalition government.

The rating agency said it had downgraded Italian debt to "A/A-1" from a "A+/A-1+" grade because of "Italy's weakening economic growth prospects."

The downgrade comes at a highly sensitive moment in the eurozone debt drama, which has so far witnessed enormous bailouts for debt-ravaged Greece, Ireland and Portugal.

Oil prices had slumped Monday on concern that Greece was on the brink of default, while the market was also rocked by the ongoing political feud over deficit reduction in the United States.(AFP)