Benchmark U.S. crude increased Monday by $1.61 to $104.63 per barrel in New York while Brent crude rose by $1.55 cents to $124.43 per barrel in London.
Manufacturers are big users of diesel fuel, so increased factory activity usually means increased demand for diesel.
The Institute for Supply Management, a trade group of purchasing managers, reported that U.S. manufacturing grew in March at a faster pace than February. U.S. factories added 100,000 jobs in the past three months to help fill a growing list of new orders.
China's manufacturers also gained momentum in March, according to a report published over the weekend.
The price of oil also reflects ongoing tensions over Iran's nuclear program. Iran exports 2.4 million barrels of oil each day. The U.S. and Europe have imposed sanctions that aim to make it more difficult to finance those exports. Traders are betting that if that oil comes off the market, world supplies will tighten this year.
Saudi Arabia, Libya and Iraq are expected to help out by pumping more oil this year. But there's still a risk that the standoff in Iran could escalate "into military action that screws things up across the Persian Gulf," said Peter Donovan, a broker with Vantage Trading.
Analysts estimate that oil prices are $15 to $20 per barrel higher this year due to fears of a prolonged conflict between Iran and the West.
Meanwhile, natural gas futures fell to a 10-year low, losing 2 cents to $2.106 per 1,000 cubic feet. Natural gas prices have plummeted this year following a production boom that could push U.S. supplies close to their maximum capacity later this year.
In other energy trading, heating oil added 6.35 cents to $3.2336 per gallon and gasoline futures increased by 6.23 cents to $3.3704 per gallon.