World oil prices rebounded slightly Tuesday on encouraging Chinese manufacturing data.

New York's main contract, light sweet crude for September, rose 36 cents to $88.50 a barrel.

Brent North Sea crude for delivery in September added 16 cents to $103.42 a barrel in London.

Prices plunged by more than $3.50 on Monday as eurozone debt strains, centered on Spain, spelled weaker demand for the commodity.

However, the market nudged into positive territory on Tuesday after encouraging economic data from China, the world's biggest energy-consuming nation.

"Oil prices are recovering somewhat," said Commerzbank analyst Carsten Fritsch. "They are finding support from the preliminary PMI for the manufacturing sector in China."

Banking giant HSBC said its Purchasing Managers' Index (PMI) for China -- which measures manufacturing activity -- hit a five-month peak of 49.5 this month, well up from the 48.2 recorded in June.

HSBC said government measures to boost growth in the world's second-biggest economy, including interest rate cuts, were working.

A PMI reading above 50 indicates expansion and while the data remained negative, the improvement on the month provided some hope that the Chinese manufacturing sector was heading in the right direction.

"The endless eurozone debt crisis and slowing growth rates in China continue to preoccupy market participants," noted VTB Capital analyst Andrey Kryuchenkov.

"So, given the ongoing uncertainty, many saw a perfect opportunity to take profits yesterday. Crude trade is set to remain volatile this week, with (economic) concerns countered by tensions in the Middle East," he added.

The oil market hit two-month highs last week as traders worried that rising tensions in the crude-rich Middle East -- particularly in Iran and Syria -- would hamper supplies.

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