* 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)