Oiled Up, Dollar Down

Oil is now hovering at the $80 mark after starting the month around $65 a barrel. Gas prices are up nationwide by about 35 cents a gallon. In many parts of the country, gas prices are more expensive now than they were a year ago.

"The market is cautious about pushing oil prices higher because the demand fundamentals are still weak and the world economy is still fragile," said Ryuichi Sato, an analyst at Mizuho Corporate Bank.

Adding to bearish sentiment, Nigeria's main militant group reinstated a ceasefire on Sunday in the oil-producing Niger Delta to allow for peace talks with the government. Attacks on oil installations by the Movement for the Emancipation of the Niger Delta (MEND) have cut output in the major oil exporter for the last three years.

The dollar weakened against a basket of currencies, offering some support for oil. A Chinese report saying Beijing should increase its holdings of euros and yen in its foreign reserves knocked the U.S. currency.

China was again the bright spot for the global economic outlook, following comments by Vice Premier Li Keqiang that the country's economic recovery has consolidated after having performed better than expected. Its strong economic growth was reflected in a 12.5 percent year on year jump in implied oil demand, the sixth rise in a row and first double-digit growth since August 2006.

That doesn't bode well for the recovery. If the dollar continues to weaken and China continues to grow rapidly, oil prices will go up regardless.