Oil rose towards $98 a barrel on Tuesday, rebounding after a near 10 per cent drop in the previous session in response to the rejection by US lawmakers of a financial sector rescue plan.Fears of a major meltdown following historic Wall Street losses eased as European stocks firmed slightly on Tuesday, suggesting some belief that markets fell too far in Monday's selloff."We've been moving in tandem with how the equity markets have performed," said Rob Laughlin of MF Global. "In terms of the rally today, I think things were overdone last night across many markets, including energy.""I'm not suggesting the panic is over, but I am suggesting the scare tactics in some quarters have proven to be rather overdone."US crude was up $1.10 at $97.47 a barrel by 1015 GMT, after losing $10.52 on Monday to $96.37 - the second biggest fall since April 23, 2003. London Brent crude rose $1.42 to $95.40.Concern over the financial sector continued, nonetheless, with Belgian-French financial services group Dexia getting a 6.4 billion euro ($9.18 billion) capital boost from public shareholders.Ireland offered to guarantee all bank deposits for two years to improve banks' access to funds on international markets, helping sentiment in equity market.On Monday, the US House of Representatives voted 228 to 205 against a bailout plan that would have allowed the Treasury to buy up toxic assets from banks. The shock rejection of the plan sent stock markets sliding.Oil has fallen sharply from a record high of $147.27 reached in July on signs that high energy prices and the financial crisis have cut into crude demand in the United States and other industrialised nations.In addition, oil has also been dragged down as investors, who had rushed into commodities earlier this year as a hedge against inflation and the weak dollar, sold crude for safer havens.Analysts said the spread of credit problems to Europe was also stoking fears that the financial turmoil, which started with risky lending to the overheated US property market, had gone rapidly global."Slower international economic growth is bound to dent oil demand," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
