China's decision to raise interest rates and raise its reserve requirements for its banks has fuelled speculation that the Chinese central bank is wary of a forming asset bubble in its markets.

This paring back of stimulus has in turn put the skids under commodity prices which had been rising rapidly on expectations that China would lead the world into recovery.

Oil broke above its previous highs last week, which should have been the pre-cursor to a move towards $89.00, however this news has seen Oil slip back below its previous highs at $82.00 and has also slipped below $80 as well, hitting a low of $79.63 today.

The recent cold snap in Europe and the US has also helped lift oil prices recently, while this afternoon we should see the latest weekly crude oil and gasoline inventory data.

This data is notoriously volatile, but it could provoke a sharp move higher, if it shows a significant deficit.

The oil price should find some support at the $79 area while a fall below that could see a re-test of the channel break out support around $77.00.

Despite the slide back in oil prices a small fall is not necessary a bad thing for any global recovery as it will contrive to keep manufacturing costs low.

If the oil price rises too high at some point manufacturing costs will rise which would then push inflation higher and run the risk of choking off any recovery.

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