* Equities rise on US, China factory activity
* Dollar hits 2009 low vs. euro, currency basket
* IEA says oil demand may recover in 2H 2009
* US Energy Sec warns higher oil prices may hurt recovery
(Adds comments from U.S. Energy Secretary in graphs 9-11)
By Matthew Robinson
NEW YORK, June 1 (Reuters) - Oil jumped more than 3 percent
to hit a near seven-month high over $68 a barrel on Monday as
improving global factory activity bolstered expectations of an
economic recovery.
Data showed U.S. manufacturing shrank at a
slower-than-expected rate in May, while industrial activity
expanded in China. Surveys in Europe showed the manufacturing
recession was easing. []
Major stock market indexes rose on the news, undeterred by
General Motor's move to file for the biggest bankruptcy in U.S.
manufacturing history. []
U.S. crude <CLc1> settled up $2.27 to $68.58, the highest
settlement since Nov. 4, after reaching $68.68 during intraday
activity. London Brent crude <LCOc1> gained $2.45 to settle at
$67.97 a barrel.
Further support came as the dollar fell to the lowest level
this year, boosting investor demand for oil and commodities.
[]
"Stock markets are rallying on improved global factory
activity. The dollar is at another five-month low. All that is
being translated into the idea that the worst of the recession
is behind us," said Tom Bentz, analyst at BNP Paribas Commodity
Futures Inc in New York.
The economic slowdown battered global demand and sent crude
off record highs over $147 a barrel struck last July to below
$33, prompting oil producer group OPEC to agree to a series of
deep output cuts last year.
Oil rallied 30 percent in May on signs of a turnaround,
pushing OPEC to maintain output targets when it met in Vienna
last week.
U.S. Energy Secretary Steven Chu said in an interview at
the Reuters Global Energy Summit in Washington that while the
jump in oil prices reflects an improving econmy, additional
price hikes could slow the economic recovery. []
"My guess is that the recent increases (in oil costs) are
reflecting more signs that the economy is stabilizing and will
increase in perhaps a year or so," said Chu, speaking at the
Reuters Global Energy Summit in Washington, D.C.
"The higher it goes in general ... it will impede the
recovery."
(For other news from the Reuters Global Energy Summit,
click on http://www.reuters.com/summit/GlobalEnergy09?PID=500)
Saudi Oil Minister Ali al-Naimi said during the weekend
that OPEC would wait until crude inventories fall to around 53
days of forward cover before considering raising output, nearly
10 days below current levels. []
The head of the International Energy Agency (IEA) said
global oil demand may not have bottomed out yet but could still
recover by the end of 2009 if the economy gets back on track.
[]
"Our calculations are telling us that if economic growth
comes back as the World Bank or International Monetary Fund
have been saying, and if OPEC continues the current production
level, the demand level may come back to the regular five-year
average towards the end of the year," IEA's Nobuo Tanaka said.
A Reuters survey of analysts forecast weekly U.S. inventory
data will show a 1.5-million-barrel decline in crude stocks for
the week to May 29, while gasoline and distillate inventories
were seen rising. []
(Additional reporting by Robert Gibbons, and Gene Ramos in New
York, Alex Lawler in London and Jonathan Leff in Singapore;
Editing by David Gregorio)
