Oil jumps $2 on economic optimism
Futures rise to a one-month high after crude supplies in China decline and stocks advance.
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NEW YORK (Reuters) -- Oil rose more than $2 a barrel to touch a one-month high above $72 Monday as positive manufacturing data in the United States and China raised optimism for an economic recovery that could bolster energy demand.
U.S. crude rose $2.13 to settle at $71.58 a barrel Monday, after earlier hitting $72.20, the highest since June 30.
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 Institute for Supply Management figures released on Monday.
The July index of national factory activity rose to 48.9 from 44.8 in June. It was the highest reading since August 2008.
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.
Analysts said a weak dollar, which on Monday slid to its lowest point this year against a basket of currencies amid increased risk appetite, would offer support to oil.
"The weak dollar and the manufacturing data are big boosts to the energy markets today," said Phil Flynn, analyst at PFGBest Research, Chicago.
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 nine months.
European shares hit a new high for 2009, led by banks.
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.
The market climbed about 2% 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%.
China's crude stockpiles, including state strategic and commercial reserves, declined 2.7% in June from a month earlier, the first fall in four months, China OGP, a newsletter run by Xinhua, reported.
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% from 72% in June, a Reuters survey showed.
The market awaits weekly U.S. crude inventory data on Tuesday from the American Petroleum Institute and Wednesday from the Energy Information Administration.
According to a preliminary Reuters poll, analysts expect a 1-million-barrel rise in crude stocks last week, a 1.1-million-barrel rise in distillate stocks and a 1.6 million-barrel draw in gasoline stocks. 
