By Polya Lesova & Myra P. Saefong, MarketWatch
FRANKFURT (MarketWatch) -- Oil futures rose in volatile trading on Monday, erasing their earlier losses, as a marginally weaker U.S. dollar and data suggesting the recession may be over encouraged traders to buy crude and shrug off worries over weak demand and ample supply.
Crude oil for December delivery was last up 81 cents to $81.31 a barrel in electronic trading on Globex.
The contract rose to an intraday high of $81.50 a barrel.
"This is a market being influenced by upside forces right now," said Phil Flynn, vice president at futures trading and research firm PFG BEST Research in Chicago.
"With the dollar still showing significant weakness, the market continues to go higher," Flynn said. "This market is not following supply and demand fundamentals. The dollar weakness is causing the bulls to come in."
Oil prices gained 3.4% last week. See Friday's Futures Movers.
The dollar fell to a fresh 14-month low against the euro Monday after a Chinese central bank researcher called for moving some of the country's massive foreign reserves into euro and yen holdings.
The dollar index (DXY 75.42, -0.03, -0.04%) , which tracks the performance of the greenback against a basket of other major currencies, edged down 0.1% to 75.404.
Oil prices were also boosted by economic data.
The Chicago Fed National Activity Index fell to -0.81 in September from -0.65 in August, the Federal Reserve Bank of Chicago reported on Monday.
However, the index's three-month moving average in September improved to a level greater than -0.7 for the first time since the early months of this recession.
For the four previous recessions, the first month when the moving average was above -0.7 coincided closely with the end of each recession as eventually determined by the National Bureau of Economic Research, the Chicago Fed said in a statement.
The data was "definitively a supportive factor," Flynn said. "It's a minor economic number, but it was just enough to tip us" into positive territory.
Nigerian supply worries ease
Earlier Monday, the contract fell to an intraday low of $79.56 a barrel after Nigeria's main militant group declared an indefinite ceasefire over the weekend, easing worries over supply disruptions in the African nation.
Nigeria's main militant group -- the Movement for the Emancipation of the Niger Delta (MEND) -- declared an indefinite ceasefire on Sunday in order to encourage dialog with the government, according to media reports, citing a statement from the group.
Attacks by MEND on Nigeria's oil industry, which is mostly located in the Niger Delta, are blamed for a sharp decline in crude production in recent years.
In other energy news, Chinese oil demand climbed to 33.8 million metric tons in September, as refiners in the world's second-largest oil consumer raised their crude processing rates and as the country's net refined product imports rose, according to a Platts analysis of official data.
Demand in August had fallen by 5.4% from July to 33.02 million metric tons to mark the first month-on-month decline since March, Platts reported from Hong Kong on Friday.
Crude-oil prices had managed to close above the $80 level for the past three trading sessions in New York, with the recent rally likely due to "speculative inflows into the futures market, given the lack of improvement in fundamentals," analysts at Credit Suisse said in a note to clients Monday.
But "we expect oil prices to soften again in the near term into the mid $70's before moving higher into next year," they said.
Also on Globex, November natural-gas futures tumbled 31 cents, or 6.4%, to $4.48 per million British thermal units.
November heating oil gained 2 cents to $2.09 a gallon and November reformulated gasoline rose 3 cents to $2.07 a gallon.
