In the energy market Tuesday, crude for November delivery recovered modestly from Monday’s selloff, closing at $90.06/barrel, up $2.25. November reformulated gasoline added less than a half-cent, to $2.0628/gallon.

Sucden Research analysts attributed Tuesday’s action to “technical buying and growing optimism global central banks may cut rates to ease fears, after the Reserve Bank of Australia slashed interest rates.”

“We seem to be drifting in and out of panic mode,” wrote Edward Meir, of MF Global. But Meir isn’t sanguine, looking forward.

“Buyers are sitting on their hands, while sellers are liquidating positions and fleeing toward the safety of cash,” he said. “However, despite the recent declines amid very abnormal market conditions, we think that some commodity markets — like crude — are still overextended, and have more room to fall.”

In its monthly report, the Energy Information Administration said crude prices should average $116 per barrel in 2008 and $126 in 2009. “Declines in U.S. oil consumption are not expected to be as large in the second half of this year [as in the first] due to both relatively weak consumption in the second half of last year and the price declines over the past several months,” the EIA said.

Source: Crude rallies – Market seen ‘drifting in and out of panic mode’