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 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 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.

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.

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.

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.

(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)

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