London — Oil steadied on Wednesday, with Brent trading near $80 a barrel, as a Chinese economic stimulus package and geopolitical tensions were offset by concerns about tepid demand and a stronger dollar.
The front-month March contract for Brent crude was down 4c to $79.51 a barrel at 11.09am GMT, though West Texas Intermediate ticked up 4c to $74.41.
China’s central bank will cut the amount of cash that banks must hold as reserves from February 5, governor Pan Gongsheng said on Wednesday, the first such cut for the year as policymakers extend efforts to shore up a fragile economic recovery.
The move will free up ¥1-trillion (about $139.45bn) to the market, he added.
US crude stocks fell by 6.67-million barrels in the week ended January 19, according to market sources citing American Petroleum Institute figures on Tuesday. Petrol inventories, however, increased by 7.2-million barrels, stoking concerns about fuel demand in the world’s top oil consumer.
The Energy Information Administration (EIA), the statistical unit of the US department of energy, will release the data later on Wednesday.
A stronger dollar also weighed on oil prices as demand from buyers in other currencies ebbs because they have to pay more for dollar-denominated oil.
The dollar index hovered near a six-week high against major peers on Wednesday as investors cemented expectations that the Federal Reserve would be in no rush to cut interest rates in the face of a resilient US economy.
Geopolitical tensions, which have led to a massive displacement in global trade, remained in focus.
“Heightened geopolitical risk, including the recent shipping disruptions, will maintain the oil price premium,” ratings agency Fitch said on Wednesday.
“However, without material disruptions to actual oil production, or a wider escalation of attacks … we do not expect a strong upside to our $80 a barrel Brent price assumption for 2024, as there is material Opec+ spare capacity.”
A coalition of 24 nations led by the US and UK conducted further strikes against Houthi fighters in Yemen on Tuesday. The strikes were aimed at stopping the Houthis’ attacks on global trade, Britain said in a joint statement.
The US said Iran-backed Houthis have mounted 26 attacks since late November on commercial shipping in the Red Sea, a shipping lane used by about 12% of global oil trade before the attacks.
The US also carried out strikes against Iran-linked militia in Iraq on Tuesday after an attack on an Iraqi airbase that wounded US forces.