* Oil soars after breaking $80 technical level
* Equities surge on banking results
* Tropical depression forms in mid-Atlantic -NHC
* Coming Up: API U.S. oil inventory data Tuesday
(Updates prices)
By Edward McAllister
NEW YORK, Aug. 2 (Reuters) - Oil broke above $81 a barrel
to its highest level in nearly three months on Monday, climbing
over 3 percent as a sharp rise on equity markets and a weak
dollar raised optimism about the strength of the global
economic recovery.
U.S. September crude <CLc1> rose $2.59, more than 3
percent, to $81.54 a barrel by 1:02 p.m. EDT (1702 GMT), the
highest price since May 5.
ICE Brent <LCOc1> rose $2.72 to $80.90, the highest level
since May 13.
U.S. stocks hit 10-week highs as strong earnings results,
better-than-expected manufacturing data and strong raw
materials shares buoyed indexes.
European stock markets set the tone early, hitting a
three-month high following strong results from leading banks
HSBC <HSBA.L> and BNP Paribas <BNPP.PA>. []
The U.S. dollar fell to a three-month low against a basket
of currencies <.DXY> as investors moved to riskier assets,
which supported oil prices. A weaker greenback makes
commodities cheaper for holders of other currencies.
"With the still-weak dollar, people are more attracted to
rising equity prices. That is the reason for the technical
breakthrough today," said Gene McGillian, analyst at Tradition
Energy in Stamford, Connecticut.
U.S. crude looks to have broken out of the $70-$80 a barrel
range it traded in for most of the last three months,
triggering further buying.
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 to
the highest level since May on the New York Mercantile Exchange
in the week to July 27, the CFTC said. (Graphic:
http://link.reuters.com/fyh82n )
STORM RISK
Tropical Depression 4 formed in the Central Atlantic Ocean,
the U.S. National Hurricane Center said, and that news also
supported oil prices. []
The hurricane season is entering 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.
"You have Tropical Depression number four, which is not
supposed to hit the Gulf of Mexico, but who knows where it
might go," said Phil Flynn, analyst at PFGBest Research in
Chicago.
Some analysts warned oil's rally may be short-lived if
investors focus on the weak fundamental outlook following
lackluster economic data.
"I don't see a reason for any more 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 Joe Brock in London, Robert Gibbons
and Selamawit Gebrekidan in New York, and Alejandro Barbajosa
in Singapore; Editing by Marguerita Choy)
