Oil prices changed direction on Tuesday after several days of declines and rose to near $73 a barrel as rallying equities boosted expectations for the pace of global fuel demand growth.

U.S. crude for August delivery rose 85 cents to $72.99 a barrel by 0957 GMT (5:57 a.m. EDT), after earlier falling more than $1 to its lowest level in over a month.

ICE Brent crude for August rose $1.13 to $72.60 by the same time.

The market switched direction after global stocks bounced off six and seven week lows, with MSCI's all-country world stock index .MIWD00000PUS up nearly 1 percent.

The dollar also fell against other currencies in a move that helped lift oil prices by making the commodity cheaper for non-dollar buyers.

The oil price move is part of an extended session that will combine the trades of Monday and Tuesday on the New York Mercantile Exchange (NYMEX) because of the U.S. Independence Day holiday.

I would say that the downwards movement has been overblown. Macroeconomic data and equities are in the driving seat and that's why sentiment is better today, said oil analyst Amrita Sen at Barclays Capital.

Oil prices fell every day last week for a cumulative decline of 8.4 percent, the biggest weekly drop since early May.

Earlier on Tuesday, prices dived to the lowest level since June 8 after reports on Monday showed global services growth slowed in June and after weak manufacturing data for major economies published last week.

The data had stoked concerns of a double-dip recession that enfeebled risk appetite for oil.

For some, Tuesday's bounce could signal a push toward the middle of the $70-$80 a barrel range.

Energy prices have arguably discounted the slower growth picture by moving lower, so we think the complex should be able to defend its mid-June lows for the time being, said Edward Meir, senior commodity analyst at MF Global, referring to prices in the mid-$70s last month.

Later on Tuesday, U.S. non-manufacturing PMI data for June is set to give further indications about the direction of the economy.

Weekly stocks data from the American Petroleum Institute (API) will be delayed to Wednesday due to the U.S. holiday and government statistics from the Energy Information Administration (EIA) will be published on Thursday.

Traders will also watch closely a weather system located between Mexico's Yucatan peninsula and western Cuba which has a 30 percent chance of developing over the next two days into a tropical cyclone, the U.S. National Hurricane Center said late on Monday.

With some 14-23 hurricanes expected in the Gulf over the next few months, we would be very reluctant to go short this market right now, said Meir.

The system's location and expected course are similar to those Hurricane Alex followed in its formation late in June, before moving into the Gulf of Mexico, where it forced Mexican oil terminals to shut and U.S. producers to curb output.

(Additional reporting by Alejandro Barbajosa in Singapore; Editing by Anthony Barker)