Oil prices rose by around $1 dollar to above $60 on Tuesday as renewed confidence across financial markets helped to reverse some of last week's falls.

U.S. crude rose by $1.15 to $60.84 a barrel by 1400 GMT (10 a.m. EDT), while London Brent crude rose $1.07 to $61.76.

On Monday, U.S. crude had dropped to a session low of $58.32, its weakest since mid-May, but began to recover in late trade and settled only 20 cents below Friday's close.

Last week prices fell by nearly 11 percent in the largest weekly fall since January.

People are looking at the bigger picture for direction on oil prices. It looked like we were heading south, but it is getting a lift off of yesterday's U.S. rally and people are looking out for the earnings, said Rob Montefusco at Sucden Financial.

Rebounding equity markets, which are anticipating upcoming earnings will provide signs of economic recovery this week, helped to spur oil higher.

Goldman Sachs posted a better-than-expected 33 percent rise in earnings on Tuesday.

World stocks as measured by the MSCI rose by 1 percent to 239.24 points on Tuesday, following on from a more than 2 percent rally on Wall Street on Monday.

A speech by U.S. Treasury Secretary Timothy Geithner, pointing to growing confidence in the banking sector, helped to lift sentiment.

But for oil, weak fundamentals could limit gains.

In its latest monthly report on Tuesday, the Organization of the Petroleum Exporting Countries said world demand for its oil would fall by 380,000 barrels per day to 28.11 million in 2010 compared with this year. For the nearer term, the market will look to U.S. inventory data for release on Tuesday and Wednesday.

Late on Tuesday industry body the American Petroleum Institute will release its figures, following by the U.S. government's Energy Information Administration on Wednesday.

Analysts polled by Reuters predicted crude stocks would have fallen for a sixth straight week, but distillate inventories -- which include diesel and are already at a nearly 25 year high -- were expected to rise again.

Gasoline stocks were also expected to rise higher.

Some analysts identified the widening offensive by Nigeria's main militant group against Africa's largest oil producer as a bullish factor that could limit supplies.

The Movement for the Emancipation of the Niger Delta (MEND) sabotaged an oil dock in Lagos state, killing five people in the group's first attack outside the Niger Delta since it began its latest campaign.

We thought this (attack) rather important, for any time a rebel organization extends its geography it is a sign that the government is losing control and the rebels are gaining, said Dennis Gartman in his daily trading note.

But others said the release of the suspected leader of MEND was likely to signal a diminishing threat to Nigeria's oil exports.

(Additional reporting by Fayen Wong in Perth; editing by Anthony Barker)