Singapore: Oil steadied below $80 a barrel on Tuesday after a fall of nearly 2% in the previous session, its biggest one-day fall in more than two weeks, as the market awaits the outcome of Opec and central bank meetings.
With the dollar also flat against the euro, after gains the previous day on worries about debt problems in Greece, there was little reason for oil prices to move.
US crude futures for April dropped 14 cents to $79.66 a barrel by 10:55am, while London April Brent dropped 15 cents to $77.74.
The slide in oil prices on Monday, which took front-month crude below $80 for the first time since 4 March, was triggered by dollar gains, and also fears that a 16-month high in consumer inflation in China might lead the country’s central bank to raise bank reserve requirements as early as this week.
China, the world’s second biggest oil consumer, has already tightened reserve requirements twice this year, with each move hitting commodity markets worried about slower demand from a major engine of demand growth for raw materials.
“I think China’s economy will undergo a phase of consolidation this year and we probably won’t see the boom it went through in 2009,” said Benson Wang, a crude oil trader at Commodity Broking Services in Sydney.
“Oil is seeing some range-trading at the moment and it will be hard for it to break out of the top end of this range.”
Asian shares rose modestly, with technology stocks nosing ahead, while the dollar held its ground ahead of a Federal Reserve policy meeting later on Tuesday expected to reiterate a pledge to keep rates low for a long time.
Given lingering labour market weakness and doubts on the strength of the economic recovery, most market participants expect no change in rates and a continued commitment to keep borrowing costs low.
The outcome of an Opec meeting that starts on Wednesday also seems a done deal, with Saudi Arabia’s oil minister saying on Monday that the producers’ group might not need to adjust output policy this year if markets remain stable.
“The market is in balance, the price is great, inventories are coming down, so why should we do anything?” he said ahead of the meeting, echoing comments made by other key Opec members Iran and Qatar.
US domestic crude stockpiles likely rose by 900,000 barrels last week, marking the seventh straight build, a Reuters poll ahead of weekly industry and government inventory reports showed on Monday.
Distillate and gasoline stocks fell, the poll showed.