This works because the oil column should be exerting less than 14.7 PSI (1ATM) on the diaphragm.  360 lbs sounds like a lot, but if the area of the column is greater than 24 square inches, it should work properly.  Also, it should not matter the orientation of the diaphragm at all.  It works on the basic PVnRT equilibrium proposition.  Understandably, the open atmosphere is not often thought of as a pressure vessel.  This is basically an oil based barometer.