UPDATE 7-Oil rises nearly $2 on U.S., China factory output

                                
 * U.S. and Chinese factory output data encouraging
                                
 * U.S. dollar his 2009 low as risk appetite rises
                                
 (Recasts, updates prices, adds detail throughout, changes
dateline from previous LONDON)
                                
 By Edward McAllister
                                
 NEW YORK, Aug 3 (Reuters) - Oil rose more than $2 a barrel
to hit a one-month high near $72 on Monday as positive
manufacturing data in the U.S. and China raised optimism for an
economic recovery that could bolster energy demand.
                                
 U.S. crude <CLc1> rose $1.86 to $71.31 at 11:38 a.m. EDT
(1538 GMT) after earlier hitting $71.95, the highest since June
30. Brent crude <LCOc1> gained $1.68 to $73.38.
                                
 The U.S. manufacturing sector continued to shrink in July,
but at a slower pace than in June and at a lesser rate than
expected, according to figures released by the Institute for
Supply management on Monday.
                                
 The July index of national factory activity rose to 48.9
from 44.8 in June, the highest reading since August 2008.
[ID:nN03512275]
                                
 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.
                                
  "The weak dollar and the manufacturing data are big boosts
to the energy markets today'" said Phil Flynn, analyst at
PFGBest Research, Chicago.
                                
 Analysts said a weak dollar, which slid to its lowest point
this year on Monday against a basket of currencies amid
increased risk appetite, would offer support to oil. [USD/]
[FRX/]
                                
 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 9 months. [.N]
                                
 European shares hit a new high for 2009, led by banks.
[.EU]
                                
 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.
                                
 On Friday, crude rallied almost 4 percent as data showed
the U.S. economy shrank at a smaller-than-expected 1 percent
annualized pace in the second quarter, raising hopes the
recession was easing.
                                
 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 in June, including both state
strategic and commercial reserves, declined 2.7 percent from a
month earlier, the first fall in four months, China OGP, a
newsletter run by Xinhua, reported. [ID:nPEK147641]
                                
 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.
[ID:nL350135]
 (Additional reporting by Robert Gibbons and Gene Ramos in New
York Fayen Wong in Perth, Alex Lawler and Ikuko Kurahone in
London; Editing by Marguerita Choy)