Oil climbed toward $78 a barrel on Tuesday, adding to the previous session's advance, as concern eased that Dubai's debt problems would set back the global economic recovery.

European shares rose early on Tuesday as investors' appetite for relatively risky equities increased, following on from gains in Asia. The dollar fell against a basket of currencies.

Dubai fears seem to be fading away, said Carsten Fritsch, analyst at Commerzbank. Once again, it is financial market developments -- a weaker dollar, rising stock markets and rising risk appetite, he said of oil's rise.

U.S. crude for January delivery rose 62 cents to $77.90 a barrel by 0929 GMT (4:29 a.m. EST). Brent crude added 62 cents to $79.09.

Government-controlled conglomerate Dubai World on Monday unveiled details of a plan to restructure about $26 billion of debt. While that appeared to ease global fears of contagion, Gulf stock markets tumbled.

Oil had risen on Monday partly after the detaining of five Britons in Iran. Britain is among the Western powers embroiled in a long-running row with Tehran over the Islamic Republic's nuclear ambitions.

Data due for release later on Tuesday include U.S. weekly retail sales, factory activity for November, pending home sales and construction spending for October.

Later in the session, the American Petroleum Institute's weekly report will give the latest indication of fuel demand in the world's largest consumer. Crude stockpiles probably were little changed, a Reuters poll showed.

Distillate inventories were expected to fall 400,000 barrels while gasoline stocks were expected to rise by 900,000 barrels, the poll showed.

Oil has rallied from below $33 last December but has held in a narrow band of $70 to $82 over the past two months. Some analysts see little that would push prices above the range given ample supplies.

We see little impetus for a break to the upside, even if economic indicators surprise to the upside this week, Credit Suisse analysts said in a research note.

The inventory overhang in the diesel and heating oil markets should prevent prices from breaking higher for the time being.

(Reporting by Fayen Wong in Perth and Alex Lawler in London; Editing by William Hardy)