Oil rebounds over $130 a barrel

By Santosh Menon

LONDON (Reuters) - Oil rose over $130 a barrel on Wednesday, rebounding from a sharp drop that had been triggered by concerns about Asian demand.

"The bounce was more technical, with the sell-off a bit too sharp and once again buyers have stepped in to buy the dips," said Addison Armstrong, director of market research at Tradition Energy.

U.S. crude CLc1 gained $1.40 to $130.25 a barrel by 5:45 p.m. British time, off lows of $125.96 hit earlier in the session but still well-below the record of $135.09 hit last week. London Brent crude LCOc1 rose $1.64 to $129.95 a barrel.

Oil prices have doubled since last year amid growing concern over supplies that have been squeezed by rapid growth in developing Asian economies.

But the market has been knocked off its peak by growing evidence that consumer nations are struggling to cope with the spike -- feeding expectations that world energy use could flag in the coming months.

Gasoline demand in Britain in April was running 7 percent below a year ago, while demand for diesel was down nearly 2 percent, according to government figures. U.S. fuel demand has also been lagging under the weight of record pump prices and an economic downturn.

Analysts said that there was fresh concern that Asian energy demand growth would also get hit soon as governments in the region take the knife to subsidies.

"There are signs that soaring energy prices are now even starting to cause ripples in the booming Asian economies," said Edward Meir at MF Global.