Oil rises over $92 after steep slide

The market spiked further after a report that a U.S. warplane violated Iran's territory and was forced to land in Iran.

U.S. crude was up $5 at $92.81 a barrel at 1313 GMT. It settled down $6.07 at $87.81 on Monday after hitting an eight-month low of $87.56.
London Brent rose $4.00 to $87.99 a barrel.

Oil had fallen by $6 on Monday as part of an international market rout, triggered by the credit crisis.

Oil traders were skeptical the rally would last.

"It's a bit of a recovery, but hardly anything to speak of after very steep falls," said Christopher Bellew, a broker at Bache Commodities. "It would be foolish to think the dawn has come in terms of oil prices going back up again."

Australia's central bank surprised the market with its biggest interest rate cut in 16 years on Tuesday, a 1 percentage point reduction in the Reserve Bank of Australia's benchmark cash rate.     Â

Investors expect the Bank of England to cut rates at its policy meeting this week and are also pricing in cuts soon from the U.S. Federal Reserve and the European Central Bank.

Even so, analysts said concern remained about the economic outlook and the weakening prospects for oil demand.

"People are still very worried about the outlook for the international economy," said David Moore of the Commonwealth Bank of Australia.

The U.S. Energy Information Administration revised down its forecast for world oil demand growth in 2009 versus 2008.

The agency cut its forecast by 140,000 barrels per day from its previous estimate published last month.

Oil has plummeted from a record high of $147.27 a barrel hit in July as high fuel prices and the growing financial crisis slow oil demand in top consumer the United States and other industrialized nations.

Analysts are watching oil demand from China -- which helped drive oil's rally from $20 in early 2002 -- for signs the crisis is hitting consumption in the world's second-largest consumer.

Oil's drop has caused worry for some members of the Organization of the Petroleum Exporting Countries.

"If this volatility continues, OPEC will have to do something," Shokri Ghanem, chairman of Libya's National Oil Corporation, told Reuters by telephone.

"We may sit down together before December," he said. OPEC's next meeting is in December in Algeria.

News that Mexico's state-owned oil company Pemex was evacuating four offshore oil platforms due to tropical storm Marco could become supportive for prices.