Oil holds steady ahead of US Fed statement

London — Oil prices were stable on Tuesday as the market awaited the Federal Reserve’s plans for rate hikes to gauge the effects on the economy and fuel demand.

Brent futures for March were up 15 cents, or 0.19%, to $79.80 a barrel by 10.36am GMT. US West Texas Intermediate crude rose 32c, or 0.43%, to $74.95.

Two US Federal Reserve officials said on Monday that they expected the Fed policy rate — now at 4.25%-4.5% — would need to rise in steps to 5.0%-5.25% to bring higher inflation rates under control.

Fed policymakers said fresh inflation data out on Thursday would help them decide whether they could slow the pace of interest-rate hikes at their upcoming meeting, to just a quarter-point increase instead of the larger jumps they decreed for most of 2022.

Thursday’s data “could easily clarify the direction of the financial and oil markets for weeks to come”, said Tamas Varga of oil broker PVM.

He said the dollar would fall if inflation came in below expectations or was below the November reading. A weaker dollar can boost demand for oil, as dollar-denominated commodities become cheaper for holders of other currencies.

US Federal Reserve chair Jerome Powell is scheduled to speak at a central bank conference at 2pm GMT.

Both WTI and Brent climbed 1% on Monday, after China, the world’s biggest oil importer and second-largest consumer, opened its borders over the weekend for the first time in three years.

China also issued a second batch of 2023 crude import quotas, raising the total for 2023 by 20% from 2022.

But analysts said that a revival of Chinese demand may only give oil prices limited support under downward pressure from the global economy.

“Considering that the recovery of consumption is still at the expected stage, the oil price will most likely remain low and rangebound,” said analysts from Haitong Futures.

Separately, US stockpiles of crude oil and distillates were expected to have fallen last week, a preliminary Reuters poll showed on Monday.

Industry group American Petroleum Institute is due to release data on US crude inventories at 8.30pm GMT on Tuesday.

Reuters