With oil breaking through the US$80 per barrel mark thanks to the continued beatdown of the U.S. dollar, get used to more than just technical analysts calling for crude to break through US$100 and beyond.

Yes, the move represents a significant market breakout, coincides with what should be a period of seasonally stronger demand, and comes at the same time as we’re seeing a global economic recovery. So the rally in oil can be justified, but can it be trusted?

For the second week in a row, U.S. refiners kept refinery use rates at historically low levels, which caused another large decline in gasoline supply.

“Refiners might as well be on strike as they cannot continue to produce a product that people are buying less of as input prices like crude go up and the dollar weakens,” noted PFGBest analyst Phil Flynn.

The statistics show little to get excited about. Along with the dramatic drop in refinery runs, U.S. crude and gasoline inventories were historically low. Distillate demand remained lackluster despite some seriously cold weather in parts of the United States, according to J.P.Morgan’s head of commodities research, Lawrence Eagles.

Meanwhile, GDP growth of nearly 9% in China may be stimulating, but it is raising concerns about how long the government can fuel this growth. For example, car sales have been impressive, but they have come with government tax breaks.

Indications of a large product surplus in Asia continue, bringing back memories of the rally between April and June, as refiners buy crude to meet higher planned demand. Prices slumped from US$75 to below US$60 then, and they could do so again.

Now, with oil prices breaching US$80, OPEC is worried about what this could do to demand. That’s right, we’re talking about “demand destruction.” So as the oil cartel watches what is happening to U.S. refiners, it will probably start to trying to persuade the market down. They may also be forced to start cheating on production to get prices under control, Mr. Flynn suggested.

Expect US$80 to be the high end of oil’s trading range for the near future.