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Oil prices hovered near $91 a barrel Tuesday as traders waited for signs on whether the U.S. Federal Reserve will cut interest rates again this week.

The Fed _ scheduled to open a meeting later Tuesday to plot its next move _ is widely expected to lower its key rate, now at 3.5 percent, by as much as one-half percentage point to 3 percent when policymakers wrap up the meeting on Wednesday.

Light, sweet crude for March delivery rose 11 cents to $91.10 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe.

In London, Brent crude rose 27 cents to $91.65 a barrel on the ICE Futures exchange.

Oil investors fear a U.S. recession would dampen crude demand, while stock investors fear a downturn there would hurt economies and companies dependent on exports to the world's largest economy.

"With little strong new fundamental news and lack of new disruptions, the correlation of (West Texas Intermediate crude oil) to equities remains exceptionally high," said analyst Olivier Jakob of Petromatrix in Switzerland. "As intraday volatility is increasing on equities ... Wall Street becomes an increasing sentiment driver for oil."

Stocks in Japan and Hong Kong surged Tuesday after Wall Street rallied overnight. The Dow Jones industrials rose 1.5 percent as investors took a dismal new home sales report as a further sign the Fed will lower interest rates this week.

In Japan, the benchmark Nikkei stock index climbed 3 percent on the Tokyo Stock Exchange, while Hong Kong's Hang Seng Index finished up almost 1 percent.

At midday in Europe, the FTSE in London was 1.6 percent higher, Frankfurt's DAX gained 0.9 percent and the CAC-40 in Paris was up 1.8 percent.

The Nymex crude contract rose 28 cents overnight to settle at $90.99 a barrel after initially falling on concerns that the report on new home sales in the United States was indication of a severe economic slowdown.

President Bush, in his final State of the Union address Monday night, urged the nation to stay confident against the gnawing recession fears, and asked lawmakers to approve a $150 billion (101.7 billion euros) plan to stave off a recession through tax rebates.

"Our economy is undergoing a period of uncertainty," Bush said. "And at kitchen tables across our country there is concern about our economic future."

Sales of new homes in the U.S. plummeted a record 26.4 percent last year while the median price of a new home edged up just 0.2 percent, the worst showing since 1991, the Commerce Department said.

The news was seen increasing chances that the Fed will cut its key interest rate again this week after cutting it by 75 basis points a week ago.

Heating oil prices rose 0.45 cent to $2.5310 a gallon (3.8 liters) while gasoline prices gained 0.32 cent to $2.3285 a gallon.

Natural gas futures rose 2 cents to $8.115 per 1,000 cubic feet.

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Associated Press writer Gillian Wong in Singapore contributed to this report.