* World equities hit year high after strong earnings
* Fundamentals of supply and demand still weak
* U.S. fuel stocks in focus
(Updates prices, adds details)
By Barbara Lewis
LONDON, July 21 (Reuters) - Oil rose towards $65 a barrel on
Tuesday, supported as world equities hit a 2009 high, but sapped
by forecasts the next figures on U.S. supply and demand would
show stocks of refined products have risen again.
By 1201 GMT, U.S. crude futures <CLc1> were trading 73 cents
higher at $64.71 and Brent crude <LCOc1> was up 72 cents at
$67.16. Tuesday's gains followed a 69 cent rise in the previous
session.
The front-month August U.S. contract expires at close of
trade on Tuesday and will replaced by the September contract,
which rose 60 cents to $65.89 a barrel.
Expectations the world economy was recovering helped to
drive oil to a peak above $73 a barrel at the end of June.
Nervousness confidence was overdone pushed prices back below $60
last week.
Analysts were divided over whether any gains, inspired by
what they describe as exogenous or external factors, can be
sustained in a fundamentally oversupplied market.
"The current bullish backdrop is reminiscent of what we saw
during the first half of June when most markets were similarly
pushing higher on the back of the weaker dollar, rising
equities, and expectations that the recovery was picking up
steam," MF Global analyst Edward Meir said.
"This time around, better-than-expected corporate earnings
(as opposed to hopes for a strong macro rebound) seems to be
dominating sentiment in equities. However, apart from that, the
two periods feel very much alike, which is why we remain wary."
The MSCI world equity index <.MIWD00000PUS> rose 0.6 percent
to the highest level since last October. []
"As long as the equities are gaining on the belief that the
worst is over, then it also translates into higher consumer
confidence, higher disposable income through the equity pick-up
and that ultimately impacts demand," said Olivier Jakob of
Petromatrix.
In the near term, demand has stayed weak even though the
U.S. driving season, traditionally a time of peak demand, is
close to its busiest period as Americans hit the road for their
summer vacations.
Weekly U.S. inventory data released at 2030 GMT on Tuesday
and 1430 GMT on Wednesday will provide the next supply and
demand snapshot.
Analysts have predicted a drop in overall fuel stocks, but a
rise in stocks of refined products, including gasoline and
diesel. []
Inventories in industrialised countries equated to 62.5 days
of forward cover at the end of May, according to the latest
figures from the International Energy Agency -- around 10 days
more than the Organization of the Petroleum Exporting Countries
considers comfortable.
Algerian Energy and Mines Minister Chakib Khelil on Monday
predicted prices would stay in a $65-$70 dollar range this year
as long as the market remained oversupplied and said OPEC could
cut output when it next meets in September. []
Many analysts predict Asia will lead any demand recovery.
A slower rate of decline in domestic fuel sales has implied
demand in China, the world's second biggest oil user after the
United States, was strengthening.
Sinopec Corp's domestic sales of refined oil products fell
by 4.8 percent from a year earlier to about 31.28 million tonnes
in the past three months, a Reuters calculation showed, compared
with a 12.4-percent drop in the first quarter. []
Demand in the United States is expected to stagnate.
For the next pointers to the economic recovery that could
revive it, traders will be looking to Federal Reserve Chairman
Ben Bernanke's semi-annual testimony on the U.S. economic
outlook and monetary policy at 1400 GMT.
(Additional reporting by David Sheppard in London and
Jennifer Tan in Singapore; Editing by Keiron Henderson)
