LONDON : Oil prices rose to one-month peaks on Monday as the dollar retreated, and on positive economic data which pointed to a pick-up in demand for crude, traders said.

Brent North Sea crude hit 72.89 dollars, the highest point since June 30, while New York light sweet crude reached a one-month peak of 70.95 dollars.

Oil later fell back slightly but remained higher compared with closing levels on Friday.

Brent North Sea crude for delivery in September was up 88 cents at 72.58 dollars a barrel.

New York's main contract, light sweet crude for September delivery, stood at 70.49 dollars a barrel, a gain of 1.04 dollars.

"Crude prices climbed higher... after the dollar continued to depreciate and following an array of better than expected manufacturing data, which further fuelled hopes of an economic recovery," said Nimit Khamar, analyst at Sucden Financial Research.

A weaker dollar can make oil cheaper for buyers of the commodity using other currencies.

Manufacturing activity in the 16 countries using the euro rose to the highest level for 11 months in July, a survey showed on Monday in a sign of improved economic health for the eurozone.The index of purchasing managers' activity in the manufacturing sector (PMI) rose to 46.3 points in July, higher than a previous estimate of 46 for the month of July in the analysis compiled by the Markit survey company.

The new level was a major increase from June when it was at 42.6 points and marked a fifth straight monthly rise in the index.

The index however still indicates a recession as it remains below a threshold of 50 which would mean a return to growth.

Market watchers also digested news of strong manufacturing data out of China and Britain. US manufacturing data is due later Monday.

While the outlook for oil demand appears promising, crude supplies face a bleak future, a leading economist warned on Monday.

A disastrous energy crunch is looming because most of the major oil fields in the world have passed their peak production, said Fatih Birol, chief economist with Paris-based International Energy Agency.

In an interview with Britain's Independent newspaper, he added that such an "oil crunch" within the next five years could jeopardise recovery from the global recession.

Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could derail the recovery, Birol said.

Oil prices had closed higher on Friday, buoyed by data from the Commerce Department that showed the US economy shrank at an annualised rate of 1.0 percent in the three months to June.

That was less than the 1.5 percent contraction most analysts had expected, renewing hopes that the world's biggest economy was likely recovering from a recession that began in December 2007.

The United States is the world's number one energy user and any improvement in its economy is seen as a boost to oil demand.