Crude Oil stabilizes above Psychological $70/bbl Level

Crude futures are recovery from yesterday's pullback in reaction to higher than expected gasoline inventory levels. Investors brushed aside a drop in crude inventories and opted to send crude reeling towards the psychological $70/bbl level. Crude has since stabilized along $70/bbl and is looking to gain back some ground after experiencing a sharp pullback since the beginning of December. Crude futures are deriving their present strength from stability in the FX markets following a strong wave of Dollar appreciation. The Dollar is weakening across the board and the USD/JPY is heading higher, indicating investors are putting some money back into the risk play. However, it remains to be seen whether stability in the likes of the EUR/USD and GBP/USD will result in noteworthy gains, or if we are simply witnessing a condition of oversold markets in a downtrend. That being said, investors should keep an eye on the Dollar and monitor its ability to extend losses from present levels. Despite crude reacting to supply levels yesterday, the futures remain inextricably tied to the value of the Greenback since these investment vehicles are negatively correlated. Meanwhile, investors should also keep an eye out for China's Industrial Production data release during tomorrow's Asia trading session. Stronger than expected Industrial Production data could improve the outlook for crude's aggregate demand, allowing the futures to add onto today's strength. On the other hand, disappointing data from China could result in more broad-based risk-aversion, dragging crude back towards $70/bbl in the process.