By Polya Lesova & Moming Zhou, MarketWatch NEW YORK (MarketWatch) -- Oil futures rose Tuesday for a second session, topping $78 a barrel as worries over Dubai's debt woes eased and as data showed China's manufacturing activity expanded at the fastest pace since 2004. Expectations that an industry group and the U.S. government will report a decline in U.S. crude inventories also helped oil move higher. Meanwhile, a weaker U.S. dollar continued to boost commodities prices. In early North American trading, crude oil for January delivery gained 89 cents, or 1.2%, to $78.19 a barrel on the Globex electronic trading platform, following a 1.6% gain on Monday. It earlier rose to an intraday high of $78.44 a barrel. "Current bullish market sentiment and a robust investment demand for oil still support the oil price at its present level," said analysts at Commerzbank in a note to clients. However, "owing to sufficient supply, we expect lower oil prices in the medium term," they said. In China, the second-biggest oil consumer, HSBC's Manufacturing Purchasing Managers Index rose to 55.7 in November, up from 55.4 in October, the bank said. The reading was the fastest pace of expansion since April 2004. See story about China's manufacturing activity. The data are creating optimism that oil demand from China, the second-biggest oil consumer, will boost global consumption. In Dubai, one of the seven emirates of the United Arab Emirates, rulers stresses unity across the U.A.E in an effort to ease the nerves of investors after concerns over the city-state's crisis sent stock markets across the Gulf sharply lower for a second day. See story about Dubai. U.S. stock futures rose on Tuesday, as investors bet that the crisis over Dubai debt will be mostly contained in the region. In currencies trading, the dollar continued its slide as investors opted for riskier assets. The dollar index (DXY 74.49, -0.39, -0.52%) , which tracks the performance of the greenback against a basket of other currencies, fell 0.5% to 74.496 in recent trading. Commodities prices and the dollar have had a strong inverse relationship in recent months. Gold futures prices, which are also denominated in the greenback, hit a new record high near $1,200 an ounce. In U.S. economic news, Tuesday's calendar features the Institute for Supply Management's manufacturing index for November, due at 10 a.m. Eastern. Economists polled by MarketWatch expect the reading to slip to 55% from 55.7%, though a strong reading from a Chicago-area gauge may hint at an improvement. Construction spending figures for October as well as automotive sales in November will also be released on Tuesday. Inventories data, OPEC The American Petroleum Institute will report data on inventories at 4:30 p.m. Eastern on Tuesday. The U.S. Energy Information Administration will release its more closely watched data on Wednesday morning. Analysts polled by Platts expect a decline of 1.3 million barrels in crude stockpiles and a rise of 900,000 barrels in gasoline inventories. They also project a decline of 450,000 barrels in distillate inventories. Iran, the second largest oil producer in the Organization of Petroleum Exporting Countries, said Tuesday it does not expect any decision to hike crude output at the cartel's meeting later this month. "Given the circumstances, there will not be an output increase and OPEC will not permit members to do it," Oil Minister Masoud Mirkazemi told reporters at a press conference, according to Dow Jones Newswires. OPEC last month reported that production by 11 members bound by quotas rose to 26.52 million barrels a day in October. That put the cartel's compliance rate to its production cut to 60%, according to a MarketWatch calculation. That's the lowest level since the cartel said it will cut production by 4.2 million barrels a day starting from the beginning of this year. Also in energy trading, January reformulated gasoline gained 2.44 cents, or 1.2%, to $2.0359 a gallon and January heating oil added 2.74 cents, or 1.3%, to $2.0753 a gallon. January natural-gas futures fell 6.4 cents, or 1.3%, to $4.784 per million British thermal units.

Source