LONDON - Oil prices rose on Tuesday as analysts took the view that renewed lockdown restrictions would have only a limited impact on fuel demand, partly reversing a steep drop in prices the previous day.

Brent crude was up 62 cents, or 1.5%, at $42.06 per barrel at 1343 GMT.

U.S. West Texas Intermediate (WTI) crude for October, due to expire on Tuesday, rose 58 cents, or 1.5%, to $39.89. The more active November contract  was up 57 cents, or 1.4%, to $40.11.

Markets were nervous about fuel demand in countries such as Britain, where the government will tell people to work from home again and will impose new curbs on pubs, bars and restaurants. 

"As any new restrictions will likely be more localised, the oil demand recovery should still continue, although at a slower pace with the easiest demand gains behind us," UBS oil analyst Giovanni Staunovo said.

Monday's price slump was spurred by concerns of an increase in coronavirus cases in major markets.

France saw its infection rate rising, Italy introduced more mandatory testing, Spain asked the army for help and Germany describe the situation as worrying.

"Losing $2 a barrel yesterday is quite a steep drop, so the market today is adjusting," said Bjornar Tonhaugen, Rystad Energy’s head of oil markets.

The easing of the oil blockade in Libya also pressured prices on Monday, but analysts expected the market to remain undersupplied as Libyan exports were unlikely to quickly reach the levels seen before the conflict.

Libya's National Oil Company said it expected oil production to rise to 260,000 barrels per day (bpd) next week. Libya produced around 1.2 million bpd - over 1% of global production - before the blockade.

"The path towards a new normal on the oil market has become bumpier, but we still see demand topping supplies on the margin and the surplus slowly disappearing," said Norbert Rucker, analyst at Swiss bank Julius Baer.

Crude prices, which fell about 5% on Monday, also won some respite as Texas refineries stayed open after a tropical storm was expected to keep losing strength, allaying worries about U.S. refinery demand for feedstock. 

Traders are awaiting the American Petroleum Institute's data on U.S. oil inventories due later on Tuesday. 

U.S. crude oil and gasoline stockpiles likely fell last week, while inventories of distillates, including diesel, were seen climbing, a preliminary Reuters poll showed. 

(Reporting by Bozorgmehr Sharafedin in London, additional reporting by Sonali Paul in Melbourne and Roslan Khasawneh in Singapore; Editing by Barbara Lewis, Jason Neely and Jan Harvey) ((bozorgmehr.sharafedin@thomsonreuters.com;))