SINGAPORE (Reuters) - Oil prices rose above $78 on Tuesday on expectations that Chinese economic indicators to be published this week will signal strong demand growth from the world's second-largest oil consumer.

China's industrial output probably jumped by 20 percent in the year to December from November's figure of 19.2 percent, a Reuters survey showed. That would be the fastest pace since February 2006.

Front-month U.S. crude futures settled on Friday below the 50-day moving average for the first time in three weeks and bounced back, setting an important support level at $78, said Mark Pervan, senior commodities analysts at ANZ.

U.S. crude futures for February delivery climbed as much as 68 cents from Friday's close of $78 and were trading up 25 cents at $78.25 by 0318 GMT. They touched a three-week intraday low of $77.07 on Monday.

Oil prices are still nearly 46 percent off their July 2008 high of more than $147 a barrel.

NYMEX will combine prices for Monday and Tuesday into a single trading session because of the Martin Luther King Day holiday.

"There is growing expectation that the Chinese data will surprise on the upside," said Pervan from Melbourne, Australia. "This means a reasonably strong commodities markets and oil is taking a lead from that."

A weaker dollar encouraged riskier trades in commodities. "That is also positive for the oil market," Pervan added.