Oil rises to $90 after steep slide

LONDON (Reuters) - Oil rose by $2 a barrel on Tuesday after a large interest rate cut in Australia aroused hopes that other policymakers would follow suit to bolster economic growth, a move that would support oil demand.

The gain recouped some of the loss on Monday, when oil slid by $6 as an international market rout sparked concerns that oil demand could be eroded further. But traders were sceptical 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."

U.S. crude was up $2.37 at $90.18 a barrel at 10:59 a.m. It settled down $6.07 at $87.81 on Monday after hitting an eight-month low of $87.56. London Brent rose $1.68 to $85.36 a barrel.

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.

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

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.