UPDATE 9-Oil prices hit 5-month high as U.S. crude stockpiles, dollar fall

* U.S. crude stockpiles fall sharply, products build -EIA
* Weaker dollar supports oil prices
* Euro zone July business activity returns to modest growth
* Global coronavirus deaths top 700,000 - Reuters tally

(Adds settlement figures)
By Devika Krishna Kumar
NEW YORK, Aug 5 (Reuters) - Oil prices rose to their highest
since early March on Wednesday after U.S. crude inventories fell
sharply and the dollar weakened, but mounting coronavirus
infections had investors worried about the demand outlook.
Brent crude LCOc1 ended the session up 74 cents, or 1.7%,
at $45.17 a barrel, while West Texas Intermediate CLc1 oil
settled 49 cents, or 1.2% higher, at $42.19 a barrel.
Both contracts gained over 4% earlier in the session.
U.S. crude inventories fell by 7.4 million barrels last
week, the Energy Information Administration said. That exceeded
the draw of 3 million barrels analysts predicted in a Reuters
poll. EIA/S
A weaker dollar .DXY , which makes oil cheaper for holders
of foreign currencies, also supported prices. /USD
"There's no escaping the benefits of a weaker dollar in the
commodity space and oil is certainly basking in its decline,"
senior OANDA analyst Craig Erlam said.
Oil also drew support from signs that talks between the
White House and Democrats in Congress on a new coronavirus
relief package are making progress, although the sides remain
far apart. U.S. factory data this week also showed an improvement in
orders, which some analysts took as a hint of economic recovery.
Euro zone business activity returned to modest growth in
July as some curbs imposed to stop the spread of the coronavirus
eased, the Composite Purchasing Managers' Index from IHS Markit
showed. Rising prices come against the backdrop of a surge in
coronavirus cases which could threaten a recovery in fuel
demand.
Global coronavirus deaths surpassed 700,000 on Wednesday,
according to a Reuters tally, with the United States, Brazil,
India and Mexico leading the rise in fatalities. "We see gasoline demand coming in close to 7% year-on-year
lower through Q3, with gasoil/diesel registering a decline of
some 4%, implying a continued slowdown of the recovery, with a
global return to 2019 levels this year increasingly in doubt,"
JBC Energy said, referring to global consumption, which has
collapsed due to lockdowns to help contain the pandemic.
The consultancy sees jet fuel demand down 50% year on year
through the third quarter.
In the United States, the world's top oil consumer,
distillate inventories rose last week to their highest in 38
years for the third week in a row, while Gulf Coast distillates
were at record high levels, the EIA said. Gasoline stocks rose
for a second straight week.
"As we approach the end of the driving season and enter into
the fall heating oil season, refining margins are going to
remain under pressure as gasoline and distillate inventories
remain substantially above last year and we have been unable to
cut into that overhang in a meaningful way," said Andrew Lipow,
president of Lipow Oil Associates in Houston.

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CHART: U.S. oil may retest resistance at $42.08 Brent oil may retreat to $43.81 before rising
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