Oil and gas tanks
File photo: Oil and gas tanks are seen at an oil warehouse at a port in Zhuhai, China. Image Credit: REUTERS

Oil steadied after three days of declines as investors weighed a hawkish set of minutes from the Federal Reserve and an industry report that pointed to a substantial build in US crude inventories.

West Texas Intermediate was little changed near $87 a barrel, holding a drop of almost 6% over the prior three days. The Fed minutes showed officials committed to raising interest rates to a restrictive level and holding them there to curb inflation, potentially slowing growth and hurting energy demand.

Figures from the industry-funded American Petroleum Institute, meanwhile, showed an increase of more than 7 million barrels last week, according to people familiar with the release. Official data will follow later Thursday.

Crude rallied last week as the Organisation of Petroleum Exporting Countries and its allies (OPEC+) agreed to cut oil supply, but that advance has been partially unwound since Monday.

Traders have become increasingly concerned about the scope for a global recession and slump in oil consumption, as well as the drag from a strengthening dollar and China's Covid Zero strategy.

OPEC reduced forecasts for the amount of its crude needed this quarter, according to a monthly report on Wednesday. The International Energy Agency will release its analysis of the market later Thursday, shedding further light on demand trends and the likely impact of sanctions on Russian crude flows.

To step up the response to Moscow's invasion of Ukraine, US officials are leading a plan to impose a cap on the price of Russia's crude, complementing tighter European Union sanctions that kick in from December. Countries working to impose the cap will meet over the next several weeks to determine the specific price ceilings, according to a senior US Treasury official.

A stronger US dollar - with a Bloomberg gauge of the currency trading near a record set last month - is also adding to headwinds for crude as it makes the commodity becomes more expensive for overseas buyers.

Widely-watched time spreads have weakened this week. Brent's prompt spread — the difference between the two nearest contracts — was $1.60 a barrel in backwardation, compared with more than $2 at the end of last week.