New York's main contract, light sweet crude for delivery in December, jumped 1.13 dollars to 78.13 dollars a barrel. The benchmark contract had tumbled 2.87 dollars Friday.

In London, Brent North Sea crude for December rose 1.35 dollars to settle at 76.55 dollars a barrel.

"Oil is rallying mainly because the dollar is getting weaker," said Phil Flynn, analyst at PFG Best.

The dollar, which found support last week as traders sought a safe haven from growing worries that a global recovery could stall, slid Monday on encouraging economic data.

A weaker dollar makes oil and other dollar-priced commodities cheaper, boosting demand and therefore prices.

"Robust economic data from China is lending support today," said Commerzbank analyst Carsten Fritsch.

The HSBC China Manufacturing PMI, or purchasing managers index, rose to an 18-month high of 55.4 in October from 55.0 in September, above the breakeven reading of 50 that indicates expansion.

A separate official Chinese PMI, compiled by the National Bureau of Statistics, showed manufacturing activity rose to 55.2 in October -- the highest since May 2008 -- from 54.3 in September.

"This was the eight month that the PMI reading stayed above 50 and the highest level since April 2008," said Mike Fitzpatrick of MF Global.

"This suggested that domestic demand was growing rapidly which augers well for energy demand growth in the world's second-largest consumer of oil."

The US manufacturing sector also expanded in October, for the third month running, according to a private survey by the Institute of Supply Management.

The ISM purchasing managers index rose to a stronger-than-expected 55.7 percent, the highest rate of growth since April 2006, from 52.6 percent in September. Any number above 50 indicates growth.

"The October ISM suggests the fourth quarter got off to a better than anticipated start," said Ryan Sweet at Moody's Economy.com.

"We expect real GDP (gross domestic product) to grow 2.5 percent at an annual rate in the final three months of the year, a slight moderation from the third quarter's 3.5 percent gain."

Official data released Thursday showed the US economy grew for the first time in a year at a stronger-than-expected 3.5 percent annual rate in the third quarter, lifting market sentiment.

However, optimism waned after the government reported the next day that consumer spending, which traditionally accounts for two-thirds of the nation's economic activity, fell in September for the first time in five months.

"I think the reality is that the economic signals out there have been mixed," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

Shum added that "even though there are signs of economic recovery, the recovery appears to be on a shaky ground and also somewhat uncertain."

MF Global's Fitzpatrick said the oil market may be entering a period of consolidation.

"The more sentiment towards sustainable recovery prevails, the greater will be the upward influence on prices," he said.

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