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Oil prices increase 3 percent following broad market rally

Oil jumped to the highest level in more than a week on some positive news about the global economy.

Oil was also pushed higher by a fall in the dollar. As the greenback weakens, investors who hold stronger foreign currencies are able to buy more crude. Monday's 3 percent rise to more than $87 per barrel all but erased losses in oil markets last week.

For people filling up at the pump, though, crude is still in a range above last year's levels. That means gasoline prices are higher than what they were in 2010.

On Monday, gasoline cost $3.594 per gallon, on average, down less than a penny, according to AAA, Wright Express and Oil Price Information Service. A gallon is still about 84 cents higher than it was last year, although regular is 8 cents cheaper than it was in July.

Crude rose Monday after Japan's economy shrank less than expected from April to June.

"Last week, we saw a market that was really driven by fear," PFGBest Phil Flynn said. "The data out of Japan shows that the world isn't falling off the map."

On Monday the dollar sank and oil rose after the government reported that foreign investors cut their holdings of U.S. Treasuries in June. The 0.4 percent decline happened when lawmakers were still fighting over a deal to increase the nation's borrowing limit.

The stock market also rose after a wave of acquisition announcements bolstered investor optimism.

China, the world's second-largest oil consumer behind the U.S., said that it expects its consumption to increase this year by 6.5 percent, according to Platts, the energy information arm of McGraw-Hill Cos.

Benchmark West Texas Intermediate crude for September delivery surged $2.50 to $87.88 per barrel on the New York Mercantile Exchange. That's the highest finish since Aug. 3.

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