* WTI, Brent crude steady but still at 2009 levels
* Japan's Nikkei index down 3.8 pct in early trade
* Put option value for WTI at $35 and $30 a barrel spikes
* But open interest in cheaper oil put options tumbles
By Henning Gloystein
SINGAPORE, Aug 25 (Reuters) - Crude oil markets edged up but
remained near 6-1/2-year lows on Tuesday, following a session
that saw prices fall as much as 6 percent after a Chinese
equities rout sent global markets into a tailspin.
Asian stocks looked vulnerable to another sell-off on
Tuesday, with investors gripped by fears of a hard landing for
the Chinese economy, the world's most important growth engine.
Japan's Nikkei .N225 index fell 3.8 percent to six-month
lows, while the MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS hit fresh three-year lows.
Crude oil markets reacted cautiously in early trading,
staying at levels comparable to the peak of the global financial
crisis in 2009 and suggesting that fears over the economic
outlook in China, the world's second-largest oil consumer, are
now at least equally as big as previous concerns of oversupply
that has plagued the market for over a year.
U.S. crude futures CLc1 were trading up 24 cents at $38.48
per barrel at 0113 GMT, while Brent LCOc1 was up 26 cents at
$42.95.
"There was a sea of red across the commodities space," ANZ
bank said on Tuesday morning.
For crude oil, the bank said that "the sharp decline was
driven by concerns around slowing Chinese demand just as OPEC
and the U.S. expand a global glut".
Output from the Organization of the Petroleum Exporting
Countries (OPEC) has hit records in a bid to squeeze out
competition especially from U.S. shale producers. But they have
so far been resilient to the resulting price plunges and kept
pumping oil.
ANZ noted that hedge funds had reduced their net-long
position in WTI to a five-year low last week, and other
indicators also helped fuel bearish sentiment.
Since the beginning of August, traders have taken up huge
options to sell WTI, known as puts, once it falls to $35 and $30
per barrel. ID:nL3N10T0QT
The value of these puts has soared by 440 percent and 345
percent respectively for $35 and $30 per barrel, with each now
worth $1.56 and 67 cents.
Yet following the spike in their value, open interest in
their trading started to fall late last week, and while some
traders said this could imply that short-sellers are closing
positions and trigger a short-lived price rise, technical
indicators remain bearish.
Reuters analyst Wang Tao said that U.S. crude could drop to
$37.05 per barrel, based on a Fibonacci analysis, and that Brent
could target $40.29.