* Tropical depression forming in mid-Atlantic -NHC
* Oil soars after breaking $80 technical level
* European equities surge on banking results
* Coming Up: U.S. manufacturing PMI; 1400 GMT
(Updates throughout)
By Joe Brock
LONDON, Aug. 2 (Reuters) - Oil rose to its highest level in
nearly three months on Monday, topping $80 a barrel as a sharp
rise on equity markets raised optimism over the strength of the
global economic recovery and the outlook for energy demand.
European stock markets hit a three-month high as risk
appetite across commodity and financial markets picked up
following strong results from leading banks HSBC <HSBA.L> and
BNP Paribas <BNPP.PA>. []
U.S. September crude <CLc1> added 2.5 percent and was up
$1.95 cents to $80.90 a barrel by 1312 GMT, just off the
intra-day peak of $81.02, the highest price since May 5.
ICE Brent <LCOc1> rose $1.99 cents to $80.17, the highest
level since May 13.
U.S. crude looks to have broken out of the $70-$80 a barrel
trading range, which has been the trend for most of the last
three months, triggering further buying.
"$80 is a very important technical level for the market and
that's why we've seen prices go immediately higher once it went
above that point," said Eugen Weinberg, oil analyst at
Frankfurt-based Commerzbank.
The U.S. dollar fell against a basket of currencies <.DXY>
on Monday as investors moved to riskier assets, helping to
support oil prices. A weaker greenback makes commodities cheaper
for some holders of alternative currencies.
"The price move is supported by positive sentiment, stock
markets are higher and the dollar is down," Weinberg said.
The growing optimism among speculative investors on the
outlook for longer-term oil prices was evident in data from the
Commodity Futures Trading Commission (CFTC) on Friday.
Money managers increased net long crude oil positions, bets
that prices would rise, to the highest level since May on the
New York Mercantile Exchange in the week to July 27, the CFTC
said.
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For a graphic on crude net long positions:
http://graphics.thomsonreuters.com/10/CFTC_Crude300710.gif
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STORM RISK
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. Atlantic storms sometimes enter the Gulf of
Mexico, posing a threat to U.S. and Mexican oil infrastructure.
The U.S. National Hurricane Center (NHC) said late on Sunday
that a tropical depression may be forming in the mid-Atlantic,
assigning a 90 percent likelihood that the system may become a
tropical depression within the next day or so.
Despite Monday's gains, some analysts warned the latest oil
price rally may be short-lived if investors focus on the weak
fundamental outlook following lacklustre economic data.
"I don't see a reason for anymore significant rise in oil
prices," said Christophe Barret, oil analyst at Credit Agricole.
"Fundamentals have not improved when you look at Chinese and
U.S. economic indicators they look pretty weak," Barret added.
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.
[]
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. []
Meanwhile, data on Friday showed that 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.
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by James Jukwey and Alison Birrane)
