Oil prices rebounded in Asian trade today on bargain hunting following sharp falls in New York, but analysts said global economic worries will continue to weigh on sentiment.

New York’s main contract, light sweet crude for delivery in January was up 18 cents at $86.44 a barrel in the morning and Brent North Sea crude for January added 21 cents to $107.24.

Prices for both contracts fell yesterday after the European Central Bank forecast that the Eurozone would continue to contract next year and only return to growth in 2014.

In its regular quarterly projections, the ECB forecast the euro area economy will shrink 0.5 per cent in 2012 and another 0.3 per cent in 2013, instead of growing 0.5 per cent next year as previously estimated.

The debt crisis gripping the Eurozone and an impasse in budget talks in the United States continued to cast a subdued mood over the market, analysts said.

“Oil suffered from the ECB growth downgrades,” said Jason Huges, head of premium client management at IG Markets Singapore.

“The Asian Development Bank (ADB) also took a trick from the ECB and decided to downgrade growth rates for developing Asian, economies which won’t help sentiment.”

The ADB today cut its 2012 growth forecast for developing Asia, which comprises 45 nations, from 6.1 per cent to 6.0 per cent. It also revised downward the 6.7 per cent growth outlook for 2013 to 6.6 per cent.

Markets are also monitoring the gridlock over talks in Washington to avoid the fiscal cliff of tax hikes and spending cuts due to come into effect on January 1. If they are unsuccessful the harsh package will likely send the US economy into recession.