Crude oil rises towards $80 as China announces economic stimulus package

Oil rose slightly on Wednesday, with Brent trading near $80 a barrel, as a Chinese economic stimulus package and geopolitical tensions were countered by concerns over tepid demand and a stronger dollar.

The front-month March contract for Brent crude was up 40 cents to $79.95 a barrel at 1410 GMT. U.S. West Texas Intermediate crude was up 57 cents to $74.94 a barrel.

China's central bank will cut the amount of cash that banks must hold as reserves from Feb. 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.

Meanwhile, U.S. crude stocks fell by 6.67 million barrels in the week ended Jan. 19, according to market sources citing American Petroleum Institute figures on Tuesday. Gasoline inventories, however, increased by 7.2 million barrels, stoking concerns over fuel demand in the world's top oil consumer.

The Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, will release the data later on Wednesday.

A stronger U.S. dollar also weighed on oil prices as demand from buyers in other currencies ebbs when 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 U.S. economy.

Geopolitical tensions, which have led to a massive displacement in global trade, remained in focus.

"Trade disruptions in the Red Sea add only a marginal premium to oil prices and no physical supplies have been lost so far, but regional escalation cannot be ruled out," HSBC Global Research said in a note.

A coalition of 24 nations led by the U.S. and UK conducted new 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 U.S. said Iran-aligned 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 U.S. also carried out strikes against Iran-linked militia in Iraq on Tuesday, following an attack on an Iraqi air base that wounded U.S. forces.