* U.S. and Chinese factory output data encouraging
* U.S. dollar hits 2009 low as risk appetite rises
(Updates prices at settlement, paragraphs 1-3)
By Edward McAllister
NEW YORK, Aug 3 (Reuters) - Oil rose more than 3 percent to
above $71 a barrel on Monday as positive manufacturing data in
the United States and China raised optimism for an economic
recovery that could bolster energy demand.
U.S. crude <CLc1> settled up $2.13 at $71.58, the highest
settlement since June 12.
Brent crude <LCOc1> settled up $1.85 at $73.55, its highest
settlement since Oct. 14, 2008. Brent has found support from
annual North Sea maintenance and supply disruptions linked to
rebel attacks in Nigeria.
The U.S. manufacturing sector continued to shrink in July,
but at a slower pace than in June and more slowly than
expected, according to Institute for Supply Management figures
released on Monday.
The July index of national factory activity rose to 48.9
from 44.8 in June. It was the highest reading since August
2008. []
In China, a surge in domestic investment spurred factory
activity, with Brokerage CLSA's China Purchasing Managers'
Index (PMI) rising to a one-year high of 52.8 in July from 51.8
in June.
Analysts said a weak dollar, which on Monday slid to its
lowest point this year against a basket of currencies amid
increased risk appetite, would offer support to oil. []
[]
"The weak dollar and the manufacturing data are big boosts
to the energy markets today," said Phil Flynn, analyst at
PFGBest Research, Chicago.
Global shares were boosted by the news, with Wall Street
opening higher and the S&P 500 Index advancing briefly above
the 1,000 level to its highest level in nine months. []
European shares hit a new high for 2009, led by banks.
[]
The latest gain in oil prices brings oil within sight of
the 2009 high of $73.38 set in June, though some see resistance
that prices could struggle to rally beyond.
"I feel that the market has gathered so much momentum and
crude may be overpriced at this point," Flynn said.
The market climbed about 2 percent last week -- the third
straight week of gains -- which helped to reverse steep losses
in the middle of the month and brought July's monthly decline
to a marginal 0.6 percent.
China's crude stockpiles, including state strategic and
commercial reserves, declined 2.7 percent in June from a month
earlier, the first fall in four months, China OGP, a newsletter
run by Xinhua, reported. []
Supply curbs by the Organization of the Petroleum Exporting
Countries since last year in response to falling demand have
helped crude rally from below $33 in December.
However, output from 11 members from the OPEC rose slightly
in July, lowering its compliance rate to its agreed supply curb
to 71 percent from 72 percent in June, a Reuters survey showed.
[]
The market awaits weekly U.S. crude inventory data on
Tuesday from the American Petroleum Institute and Wednesday
from the Energy Information Administration.
According to a preliminary Reuters poll, analysts expect a
1-million-barrel rise in crude stocks last week, a
1.1-million-barrel rise in distillate stocks and a 1.6
million-barrel draw in gasoline stocks.
(Additional reporting by Robert Gibbons and Gene Ramos in
New York Fayen Wong in Perth, Alex Lawler and Ikuko Kurahone in
London; Editing by David Gregorio)
