Crude Oil, Hong Kong, China, US, WTI, Brent, US CPI – Talking Points

• Crude oil procured higher ground on hopes of a China re-opening
• The US and China are squaring off on another geopolitical front
• US CPI lies in wait as currency and Treasuries pause. Will inflation lift WTI?

Crude oil has been buoyed through the Asian session by a cheery outlook. Hopes are growing that Chinese demand could pick up as they continue to relax some of their Covid-19 restrictions.

Hong Kong abandoned its three-day monitoring period for new arrivals in the territory today. The WTI futures contract is near US$ 74 bbl while the Brent contract is nudging US$ 79 bbl. Recent cold weather in the northern hemisphere also underpinned energy markets.

APAC equities generally spent most of Tuesday slightly in the green after a strong lead from Wall Street. US stocks appeared to be scoping out a potential soft US CPI later today that added to positive sentiment.

Several forecasters are looking at 7.3% year-on-year headline CPI against 7.7% previously. A notable deviation from these expectations might see the market re-price its thinking of what the Federal Reserve will do with monetary policy later in the week.

Elsewhere, yet another flashpoint appears to be heating up in the US-China relationship.

Washington has requested that leading chip makers in the Netherlands and Japan curb supplying their technology to Beijing with the aim of inhibiting Beijing’s military capabilities.

China has responded by lodging a formal complaint with the World Trade Organisation (WTO). The US maintains that it is a national security issue.

Treasury yields eased slightly across the curve through the Asian session after small gains overnight. Currency markets have been very quiet so far today. Gold is steady near US$ 1,780 an ounce after losing ground yesterday.

Looking ahead, the UK will see jobs data, Italy will get industrial production figures and Germany will see CPI and the ZEW survey. The focus is of course US CPI which will be released at 1330 GMT.

The full economic calendar can be viewed here.

WTI CRUDE OIL TECHNICAL ANALYSIS

WTI crude oil rallied again today after making a 12-month low at 70.08 last Friday. That level may provide support ahead of the December 2021 low of 66.12.

On the topside, resistance could be at the breakpoints of 75.27 and 76.25. The former coincides with the 10-day simple moving average (SMA).

Further up, resistance might be at the breakpoint of 82.63 or the recent peaks of 82.72 and 83.34. The 55-day SMA is also currently near that high of 83.34.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCathyFX on Twitter