Oil rose nearly $2 a barrel on Tuesday as better-than-expected U.S. housing data helped lift markets.

U.S. housing starts and permits rebounded in February from record lows, rising for the first time in 10 months, giving a glimmer of hope for the recession-hit economy.

The housing start figures were way above expectations. If this turns out to be more than just a one-off event, that definitely would be a clear sign that the housing market was starting to improve and that would improve the whole psychological aspect of the economy, said Mike Zarembski, senior commodities analyst for optionsXpress.

U.S. light crude for April delivery settled up $1.81 at $49.16 on the expiration day for April crude oil options, the highest settle since December 1, 2008.

London Brent crude settled up $1.78 at $48.24.

Options on futures are one way to bet on oil prices without the obligation to make or take delivery of the physical product. They also limit risks for buyers.

Oil has tumbled $100 from a record high above $147 last July as the global economic meltdown has dented demand for oil worldwide.

Wall Street rose after the release of the data showing the 22.2 percent jump in housing starts in February, while an upbeat broker comment on bellwether Cisco Systems drove technology shares up sharply.

Still, analysts are cautious about whether the housing data marks a definite turnaround for the world economy.

On Monday, data showed U.S. credit card defaults rose in February to their highest level in at least 20 years, undermining hopes of bank stability.

Data on Monday also showed industrial output in the United States in February plummeted to its lowest level in almost seven years.

The Organization of Petroleum Exporting Countries met on Sunday and decided not to cut output further but rather concentrate on cuts put in place in September that total 4.2 million barrels per day.

OPEC has really restored some of its credibility and there is optimism that it will be able to reach the target, said Clarence Chu, a trader at U.S.-based Hudson Capital Energy in Singapore

The producer group said on Monday that it was waiting for the Group of 20 (G20) summit on April 2, and its moves to shore up the world economy, before cutting production further.

An updated Reuters poll ahead of U.S. weekly inventory reports on Tuesday and Wednesday from the American Petroleum Institute and the U.S. Energy Information Administration showed an expected 1-million-barrel rise in crude stocks, a 0.7-million-barrel rise in distillate stocks and a 1.2-million-barrel draw in gasoline stocks.

(Additional reporting by Robert Gibbons and Gene Ramos in New York, Joe Brock in London and Fayen Wong in Perth; Editing by Christian Wiessner)