Oil was little changed at $70 a barrel today, after a 4 per cent fall overnight, as Chinese stocks recovered their poise following manufacturing sector data that suggested China's economic recovery was on track.
The release of a key gauge of US manufacturing activity in August and weekly crude inventory data later in the day, both of which are expected to show a gradual rebound in the US economy and oil consumption, will set the trading tone for the market.
By 3.20am, US crude for October delivery rose 7 cents to $70.03 a barrel, after falling 3.8 per cent yesterday. London Brent crude rose 4 cents to $69.69 a barrel.
China's benchmark Shanghai stocks index, an increasingly important gauge of global market sentiment, traded either side of parity today after diving 6.74 per cent a three-month low yesterday, spooking global risk markets on worries that the Chinese government was tightening bank lending to moderate growth and curb speculation.
Underpinning sentiment, HSBC's China Purchasing Managers' Index (PMI) on Tuesday showed a rise in August to a 16-month high of 55.1, from 52.8 in July, as a jump in both output and new orders underscored signs of a recovery.
In the United States, the Institute for Supply Management's manufacturing gauge - due at 2pm (Irish time) - is expected to have risen to 50.5 in August from 48.9 in July, which would bring it into positive territory for the first time since the recession began, a Reuters poll of economists showed.
"The US ISM data is quite important and will set the tone. If the data comes out worse than expected, we could see the market fall further towards $65," Ben Westmore, commodities analyst with the National Australia Bank.
Weekly oil inventory data from the American Petroleum Institute (API), due at 8.30pm (GMT), will also provide trading cues.
US crude stocks likely fell 400,000 barrels last week, helped by a slight rise in refinery utilisation, a preliminary Reuters poll of analysts showed.
The US Energy Information Administration (EIA) will release its own data tomorrow.
Reuters