Crude Hovers Near $82 as Market Eyes China's Inflation

Pausing near $82 a barrel on the New York Mercantile Exchange, the price per barrel of crude oil closed nearly unchanged from yesterday as traders weighed mixed economic data on the domestic front and high inflation in the Far East.

While the market's financial movements remained uncertain as Wall Street worried over China's monetary policy, light, sweet crude oil for April delivery ultimately added to yesterday's final price tag to close a smidge higher at $82.11 a barrel.

However, NYMEX gasoline futures sold off Wednesday's gains from a surprise drawdown in gasoline and distillate supplies by dropping to $2.27 a gallon at the close of the session.

On the opposite side of the energy coin, natural gas spot prices at the Henry Hub settled on the downside today at $4.44 Mcf.

Is China's Bubble Ready to Burst?

"On the one hand, I think the markets are rallying on China, but China may just turn out to be the market's Achilles' heel as we move forward," remarked Phil Flynn, senior researcher at Chicago's PFG Best.

"We saw evidence of higher inflation today, which can be bullish for oil in the short term," Flynn explained. "But at the same time, I don't think the Chinese government is going to stand idly by and allow these inflation numbers to spin out of control and lead to a possible credit crisis."

For the month of February, China's consumer inflation touched a 16-month high, signaling to markets that the Chinese government may soon tighten its purse strings.

The analyst continued, "As we learned from this country, housing bubbles can be very ugly when they pop and can really have a detrimental effect on the globe. So, because of these sharply rising prices, the Chinese government will have to rein in some of this credit, which means we may see another increase in the reserve requirements for its central banks."

Additionally, Flynn pointed to China's oil export number, which may also be bullish for the energy commodity in the short term, but may eventually pressure the Far Eastern country to slow down some of its manufacturing on fears that the economy could potentially overheat.