Russia has halted oil supplies to Belarusian refineries after failing to agree terms for 2010, traders said on Sunday. Russian oil was flowing normally to European Union customers via Belarus on Monday, Belarus' state oil firm said.

There's no scarcity (of oil). On the physical scale, it does not have any impact on the market, but psychologically this is very important news. Volumes are relatively thin, said Eugen Weinberg, oil analyst at Commerzbank.

U.S. crude for February delivery rose $1.49 to $80.85 a barrel by 1226 GMT, after touching $81.16, the highest since October 26. Brent crude climbed $1.56 to $79.49.

The bullish news and hopes for recovery in the U.S. economy allowed the oil market to continue the run that lifted prices by 78 percent last year, the biggest annual gain in a decade.

Other commodities also rose on Monday, helped by the weakening dollar. Gold rose 2 percent and base metals prices also advanced, with copper hitting a 6-month high.

Weakness in the U.S. currency boosts gold's appeal as an alternative asset, and makes dollar-priced commodities such as oil cheaper for other currency holders.

Forecasts by DTN Meteorlogix for freezing temperatures across the U.S. midwest and cold weather in the plains this week may boost heating demand and lend further support to crude prices.

Positive economic data from China and India added to the bullish sentiment.

China's factories cranked up production in December, while the rate of growth in Indian manufacturing rose for the first time in three months in December, surveys showed.

Investors will take further cues from U.S. manufacturing data later on Monday and from monthly employment figures in the first week of the new year.

On the data front, the main event will be Friday's report from the Labor Department on December U.S. non-farm payrolls.

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