UPDATE 2-Oil rally helps energy stocks lead European shares higher

* Energy stocks post best day in one month

* Travel stocks rebound after four days of losses

* German stocks rise as retail sales bounce

* STOXX 600 within 1% of record high (Updates to market close)

July 1 (Reuters) - European shares ended higher on Thursday as a rally in crude prices saw energy stocks surge more than 2%, while strong earnings reports helped dispel some concerns over the infectious “Delta” variant of the coronavirus.

The pan-European STOXX 600 closed 0.6% higher at 455.63 points, with energy stocks marking their best day in one month. Energy services provider TechnipFMC Plc was the top gainer in the sector, adding 4.4%.

Oil prices rose almost $2 on the prospect of increasing global demand, while lower U.S. crude stocks helped. Reuters also reported that OPEC would hike production by less than expected, which could result in a supply shortfall and support oil prices later this year.

“This approach comes amid a spreading Delta variant, which is still impacting mobility in certain geographies. Separately, Washington’s negotiations with Iran could also quench a substantial portion of expected deficits down the road,” analysts at TD Securities wrote in a note.

“A Summer Breakout in energy markets can continue to gather steam with supply artificially constrained.”

Travel-related stocks jumped 1.9% after falling for four days in a row on fears of more restrictions following a spike in the number of COVID-19 cases in Asia and the United Kingdom.

Airlines EasyJet, British Airways-owner IAG and Ryanair rose between 1.5% and 4%.

The STOXX 600 was now within 1% of a record high hit in June, as growing optimism over a vaccine-led economic recovery this year saw sentiment jump to a 21-year high.

Figures on Thursday confirmed the euro zone manufacturing sector expanded last month at its fast pace on record.

Germany’s DAX rose 0.5% as data showed retail sales in Europe’s biggest economy rebounded in May.

Technology stocks, which had outperformed through the pandemic, were the sole losers for the day, down 0.7%. Investors were likely comfortable in pivoting to sectors more exposed to an economic recovery.

Associated British Foods rose 4.8% as it said third-quarter sales at its Primark fashion stores that reopened after COVID-19 lockdowns were ahead of expectations in all markets.

French catering and food services group Sodexo rose 2.3% after boosting its second-half revenue and profit margin forecasts, betting on the full reopening of U.S. schools.

Sodexo’s peer, Denmark’s ISS, jumped 6.6% to the top of the STOXX 600, after the news.

Fashion retailer H&M, on the other hand, fell 1.1% as its second-quarter earnings remained well below pre-pandemic levels.

Reporting by Sagarika Jaisinghani, Julien Ponthus and Ambar Warrick; Editing by Uttaresh.V and Lisa Shumaker