UPDATE 1-Oil nears 12-wk highs; investors upbeat on commods

                                

                                
 * Tropical depression forming in mid-Atlantic -NHC
                                
 * Chinese manufacturing shrank in July -HSBC PMI
                                
 * Coming Up: U.S. manufacturing PMI; 1400 GMT
                                
 * For a technical view, click: [ID:nSGE67100E]
 (Adds HSBC China PMI in 11th paragraph, South Korea exports)
                                
 By Alejandro Barbajosa
                                
 SINGAPORE, Aug. 2 (Reuters) - Oil rose towards 12-week
highs above $79 on Monday, driven by investor appetite for
commodities and energy risk, with macroeconomic indicators in
top consumers the United States and China showing slower but
sustained growth.
                                
 U.S. September crude <CLc1> rose as much as 40 cents to
$79.35 a barrel and was up 19 cents at $79.14 by 0415 GMT,
having reached a 12-week high of $79.69 last week and climbed
4.35 percent last month. ICE Brent <LCOc1> gained 13 cents to
$78.31.
                                
 Money managers increased bets that prices would rise, or
the so-called net long crude oil positions, to the highest
level since May on the New York Mercantile Exchange in the week
to July 27, the Commodity Futures Trading Commission said on
Friday, when wheat and the CRB surged to cap their biggest
monthly gains since 1959 and May 2009 respectively.
                                
 "Long positions are starting to creep back into the
market," said Ben Westmore, a commodities analyst at National
Australia Bank in Melbourne, adding, "It's a gradual process of
regaining confidence that there is not going to be a default
soon," in a reference to the euro zone's debt crisis.
                                
 For a graphic on crude net long positions:
 http://graphics.thomsonreuters.com/10/CFTC_Crude300710.gif
                                
 "The market is aware of the fact that it's going to be a
pretty slow recovery in the U.S. and the euro zone, so although
oil demand will grow over the next 12 months or so, it's going
to be a slow, gradual process," Westmore said.
                                
 SLOWLY BUT SURELY
                                
 U.S. gross domestic product expanded at a 2.4 percent
annual rate, missing expectations for growth of 2.5 percent,
after an upwardly revised 3.7 percent growth pace in the first
quarter.
                                
 "People are looking more closely at the U.S. GDP number and
although the core of the market was disappointed, it was not
too far from expectations and there was a revision upwards to
the first quarter," said Westmore. "It was slightly more
positive."
                                
 China's official purchasing managers' index (PMI) fell to a
17-month low in July of 51.2 from 52.1 in June, the China
Federation of Logistics and Purchasing (CFLP) said on Sunday.
                                
 The PMI is designed to provide a timely snapshot of
business conditions and a figure above 50 indicates expansion.
[ID:nTOE670008]
                                
 On Monday, an index based on a nationwide survey of
business executives conducted for HSBC showed Chinese
manufacturing shrank in July for the first time since the
global downturn in March 2009 on government steps to slow bank
lending and fight property speculation. [ID:nTOE67103Z] The
index dropped to 49.4 from 50.4 in June.
                                
 Although the index pointed to a month-on-month contraction
in manufacturing, it was still consistent with annual growth in
Chinese industrial production of 11-13 percent, HSBC said.
                                
 Asian stocks rose on Monday as investors snapped up shares
of firms with robust corporate earnings, helping the market
shrug off the lacklustre U.S. and Chinese economic data.
[ID:nTOE67101X]
                                
 South Korea's exports rose 29.6 percent in July over a year
earlier, better than the 26.9 percent median forecasts in a
Reuters' survey.
                                
 STORM BREWING
                                
 A tropical cyclone forming in the mid-Atlantic also lent
support to oil prices as the hurricane season enters what in
recent years has been a period of peak activity between August
and early October.
                                
 The U.S. National Hurricane Center (NHC) said late on
Sunday that a tropical depression may be forming in the
mid-Atlantic,  assigning an 80 percent likelihood that the
system may become a tropical cyclone within the next 48 hours.
                                
 Attention this week will remain on U.S. economic data, with
the Institute for Supply Management manufacturing index
expected later on Monday, followed by July payrolls on Friday.
                                
 U.S. crude inventories posted their biggest weekly increase
since 2008 in the week to July 23 as imports surged, while
gasoline stockpiles climbed for a fifth consecutive week and
supplies of distillates including diesel for a ninth.
                                
 "The oil balance is not going to tighten too much,"
Westmore said.
                                
 BP Plc <BP.L><BP.N> could start plugging its broken deepsea
oil well in the Gulf of Mexico on Monday night, more than three
months after its rupture led to the worst offshore oil spill in
U.S. history. [ID:nN01205078]
 (Editing by Clarence Fernandez)