UPDATE 2-Oil rises above $79 on equity gains, risk appetite

                                
 * Asian shares, euro rise after stress tests
                                
 * Taiwan Formosa refinery shut after fire - spokesman
                                
 * Tropical Storm Bonnie fades, disrupts U.S. Gulf oil
output
                                
 * Nearly half of U.S. Gulf of Mexico oil production shut
 (Updates prices, Asian markets)
                                
 By Fayen Wong
                                
 PERTH, July 26 (Reuters) - Oil rose past $79 on Monday,
supported by improved risk appetite and expectations that a
forecast severe Atlantic hurricane season could bring further
disruptions to oil and gas operations in the U.S. Gulf of
Mexico.
                                
 Asian shares rose and the euro extended gains on Monday as
solid U.S. corporate earnings and strong euro zone data offset
growing scepticism that a stress test on European banks were
not strict enough. [ID:nSGE66P00G]
                                
 The upbeat sentiment was expected to carry over to European
markets, with Britain's FTSE 100 <.FTSE>, Germany's DAX
<.GDAXI> and France's CAC-40 <.FCHI> seen opening up to 1
percent higher in their first reaction to the bank test
results, which were released after European markets closed on
Friday. [ID:nLDE66P01M]     U.S. crude for September delivery
<CLc1> rose 24 cents to $79.22 by 0658 GMT. The contract
settled down 32 cents at $78.98 a barrel on Friday, after
reaching $79.60, the highest intraday price since May 6. ICE
Brent crude <LCOc1> climbed 36 cents to $77.81.
                                
 For a technical view on oil prices, see: [ID:nSGE66P00H]
                                
 "Results of the stress test were generally well-received by
the market and it helped to provide a little more certainty
since there were no real surprises," said Toby Hassall, chief
commodities analyst at CWA Global Markets Pty Ltd.
                                
 Only seven of 91 banks -- five small Spanish banks,
Germany's state-rescued Hypo Real Estate [HRXGe.UL] and
Greece's ATEbank <AGBr.AT> -- failed the tests, for an overall
capital shortfall of $3.5 billion euros. [ID:nLDE66M1T3]
[ID:nLDE66M1A2]
                                
 "On the weather front, even though there is no specific
weather threat at this point in time, we have an outlook of a
more active than normal hurricane season, so that's offering
support to oil prices, which is seeing a weather premium,"
Hassall said.
                                
 Energy companies were scrambling to restore offshore oil
and gas output, but almost 50 percent of daily crude production
in U.S.-regulated areas of the Gulf of Mexico was shut as of
Sunday due to Tropical Depression Bonnie, the U.S. government
said. [ID:nN25136592] The depression faded overnight and is no
longer shown by the National Hurricane Center's outlook.
                                
 Forecasters have said the 2010 Atlantic hurricane season,
which runs from June 1 through Nov. 30, could be the worst
since 2005, when Hurricanes Katrina, Rita, and Wilma caused
havoc in the Gulf Coast, damaging oil rigs and refineries and
forcing sharp cuts in production.
                                
 For more on Europe's bank stress tests, see:
[ID:nLDE6601T6]     A fire at the weekend forced the closure of
Formosa Petrochemicals Corp's <6505.TW> 540,000 barrels per day
refinery in Taiwan, with a crude distillation unit expected to
be shut long term and other units possibly restarting this
week. [ID:nSGE66P06D]
                                
 In China, Dalian Port Co. <2880.HK> has resumed operations
at two of its oil berths and its main 300,000 tonnage berth is
expected to reopen soon, the company said on Sunday, after a
fire at the port a week ago shut the berths down.
                                
 Analysts said oil prices will continue to be driven by
macroeconomic sentiments in the short-term, with investors
focusing on the pace and extent of a slowdown in the Chinese
economy as well as the speed of economic recovery in the United
States, the world's largest energy consumer.
                                
 On this week's outlook, strategists said Wall Street is on
the cusp of a breakout in U.S. stocks, but it will need another
spate of convincing earnings reports to feed the rally that
sprouted at the end of last week. [ID:nN2397658]
                                
 The U.S. economy is not likely to slip back into recession
but letting tax cuts for the wealthiest Americans expire is
necessary to show commitment to cutting budget deficits,
Treasury Secretary Timothy Geithner said on Sunday.
[ID:nN25186690]
                                
 In a sign of bullishness on oil prices, open interest
positions increased at the September $85 and $90 call options
on Friday versus a week ago as crude prices rose to near $80 a
barrel before ending the session slightly lower.
[ID:nN23626523]
                                
 Separately, BP Plc <BP.L><BP.N> decided Chief Executive
Tony Hayward should step down over his handling of the Gulf of
Mexico oil spill and his departure is likely to be announced in
the next 36 hours, sources close to the company said.
[ID:nN25157641]
 (Reporting by Fayen Wong; Editing by Ed Lane)