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Crude Oil Finishes Higher

Crude oil futures spike on improved demand and British boat seizure in Iran.

NEW YORK (

TheStreet

) -- Crude oil futures settled Monday's trading session much higher on bullish manufacturing data, curbed concerns about Dubai's debt crisis and fears that an errant yacht could strain ties between the West and Iran, one of the world's largest oil producers.

The January delivery contract for light, sweet crude spiked as high as $78 a barrel following reports Monday afternoon that a British crew had been detained in Iran after their racing yacht drifted into Iranian waters, according to the British Foreign Secretary. The contract settled Monday's session up by $1.23, or 1.6%, at $76.05.

Earlier in the day, oil prices drifted in and out of green territory as investors weighed improved Midwestern manufacturing activity in November, as demonstrated by the Chicago purchasing managing index's

rise to 56.1, its highest level in over a year.

Also helping oil prices on Monday, the Energy Information Administration reported higher oil demand in September -- the first increase since 2007. Oil demand rose 2.9% in September and gasoline consumption rose by 4.7% from a year ago, according to the U.S. Energy Department.

On the Nymex, the January delivery contract for gasoline gained 6 cents, or 2.9%, to $2.01 a gallon and the heating oil contract for January delivery added 4 cents, or 1.9%, to $2.05.

Late Monday, the Energy Information Administration released its monthly natural gas report for November, which showed the year's consumption to be down by 3% compared with the same period a year ago. Withdrawals during the 2009 heating season, which spans from November to March, were 13.4% lower than in 2008 and injections were 48.6% higher, indicating weak demand. Natural gas for January delivery lost 34 cents, or 6.6%, to settle Monday at $4.85.

Throughout last week and for much of Monday morning's trading session, crude oil struggled to hold on to gains as investors reacted to Wednesday's news that a state-controlled investment entity known as Dubai World requested a six-month "standstill" on repaying some $60 billion in debt. Effects rippled throughout the global markets, with U.S. equities and commodities closing lower during Friday's shortened session. The January crude oil contract slumped $1.91 at $76.05 a barrel to end the week.

Recent assurances that the United Arab Emirates' central bank would offer more liquidity to Dubai banks helped ease some concerns Monday morning. Still, a bit of uncertainty remains after reports made clear that the Dubai government would not guarantee Dubai World's debts.

A weakening dollar also supported higher crude prices. By Monday afternoon, the Dollar Index was down by 0.09%.

Oil market watchers were also eyeing news from East Africa, where

Somali pirates reportedly seized a Greek-owned oil tanker.

Oil-related equities closed mostly lower late on Monday with

ConocoPhillips

(COP) - Get Free Report

down by 15 cents, or 0.8%, at $62.19 and

Chevron

(CVX) - Get Free Report

down by 13 cents, or 0.2%, to $78.04.

The

United States Oil Fund

(USO) - Get Free Report

ETF finished ahead by 66 cents, or 1.7%, at $39.16.

Earlier, oil and gas company

Delta Petroleum

(DPTR)

said it retained Morgan Stanley and Evercore Partners to review and advise the board on strategic alternatives. Its shares shed 1 cent, or 1.1%, to 91 cents a share.

-- Written by Sung Moss and Melinda Peer in New York