Crude oil futures prices settled higher Monday guided by weakness in the dollar and a strong showing by U.S. equities.

The "lock-step" tracking was set early in the day after the dollar weakened on disappointing data from the New York Federal Reserve Bank about regional manufacturing and stock prices opened strong and held gains, said Rich Ilczyszyn, senior market strategist at MF Global.

The euro also gained strength ahead of a meeting Tuesday between the leaders of Europe's two biggest economies. Amid continued unease in the euro zone over sovereign debt issues, traders are awaiting developments from the talks between French President Nicolas Sarkozy and German Chancellor Angela Merkel in Paris. Last week, France reported its gross domestic product failed to grow as expected in the second quarter, stirring concerns about a potential downgrade of its debt.

Crude prices made a late charge above $88 a barrel for the first time in seven days. Traders said crude could come under renewed pressure ahead of Wednesday's expiration of September crude oil options on the New York Mercantile Exchange, as strong interest has built around $85 a barrel.

Light, sweet crude oil for September delivery on the New York Mercantile Exchange settled $2.50 a barrel, or 2.9%, higher at $87.88 a barrel, the most since Aug. 3. ICE September Brent crude settled $1.88 higher, at $109.91 a barrel ahead of its expiration on Tuesday.

The market will take its near-term cues from U.S. inventory data, which is expected to show a modest 400,000-barrel decline in crude oil stocks, even as refiners trim operations by 0.4 percentage point from 90% a week earlier. The data, for the week ended Aug. 12, are also expected to show gasoline stocks fell 1.3 million barrels, and that distillates (diesel/heating oil) rose by 700,000 barrels, according to analysts surveyed by Dow Jones Newswires.

The American Petroleum Institute, an industry trade association, is scheduled to release its figures for the same period at 4:30 p.m. EDT on Tuesday. The federal Energy Information Administration, the statistical and analytical wing of the Energy Department, data are scheduled for release at 10:30 a.m. EDT on Wednesday.

Widely watched international forecasts recently lowered their outlook for U.S. oil demand growth while warning that current output from the Organization of Petroleum Exporting Countries lags the volume that will be needed later this year, requiring drawdowns of already tightening global inventories.

Analysts said that amid the uncertain global economy, underscored by the plunge of U.S. crude oil prices to below $75 a barrel after Standard and Poor's Corp. downgraded the rating for U.S. sovereign debt, OPEC is likely to be extremely vigilant about defending prices in order to meet member nations' budget needs.

MF Global's Ilczyszyn said that if the U.S. economy shows signs of further weakness, "we may get dips below $80, but no sustained moves" for U.S. benchmark crude, as OPEC would likely lower output to support prices.

Lawrence Eagles, oil analyst at J.P. Morgan, said Kuwait's current budget, with high social spending and heavy fuel subsidies, requires export prices that translate to around $96 for North Sea Brent crude. That reinforces his view that OPEC would cut output to reverse a sustained fall in Brent below $90 a barrel, he said.

September-delivery gasoline blendstock futures settled 5.23 cents higher at $2.8745 a gallon, while September heating oil futures settled 4.04 cents higher, at $2.9441 a gallon. Heating oil futures have gained 6.5%, or nearly 18 cents a gallon, in the last four trading days on anticipation of continued high export demand, even if demand in the U.S. weakens, traders said.