Oil prices rebounded slightly on Tuesday after slumping a day earlier on worries about tumbling energy demand in the United States as fresh financial turmoil hit the world's biggest economy.
Brent North Sea crude for delivery in April gained 1.01 dollars to 43.22 dollars a barrel in late morning London trade.
New York's main futures contract, light sweet crude for delivery in April, rose 68 cents to 40.83 dollars a barrel.
"Crude oil is trading near the 40 dollars a barrel level, as traders are losing faith in the possibility that the US economy will rebound this year," said David Evans, market analyst at BetOnMarkets.com.
"Oil prices are expected to be very volatile this week especially towards the end of the week when the employment data will be released."
Prices had shed more than four dollars by the close on Monday as the market reacted to weak economic data in the United States, the world's biggest energy consumer, and also to dire earnings news from major financials.
The downward revision in US gross domestic product (GDP) data and high jobless claims "are at the core of the economic woes and the ultimate drag on energy prices," said Phil Flynn, vice president of Alaron Trading Corporation.
The US government announced on Friday that GDP had shrunk by a worse-than-expected 6.2 percent in the fourth quarter of 2008.
Investors were also spooked by the US government's latest massive bailout package for insurance giant AIG worth 30 billion dollars.
The bailout came as the insurer posted a 61.7-billion-dollar quarterly loss, the biggest in US corporate history.
"The financial situation, weak manufacturing, weak employment -- recession pressures the oil prices, and that's the major concern," said James Williams, an economist at WTRG Economy.
Oil prices had risen overall last week in anticipation of increasing demand for motor fuel in the United States and indications of output cuts by the Organization of the Petroleum Exporting Countries, traders said.
OPEC, which pumps about 40 percent of the world's oil, in late 2008 announced output cuts of 4.2 million barrels per day in a bid to reverse tumbling prices and members appeared generally to be sticking to the planned reductions.
