4 Min Read
* Bernanke says Fed stimulus benefits clear, downplays risks
* Asian shares, base metals rise after Fed reassures on easing
* U.S. crude oil inventories rise, refined products fall -
* Coming Up: EIA petroleum status report; 1530 GMT
By Manash Goswami
SINGAPORE, Feb 27 (Reuters) - Brent futures held steady near $113 a barrel on Wednesday after Federal Reserve's affirmation of its commitment to monetary stimulus renewed hopes of a revival in demand growth in the world's biggest oil consumer.
Chairman Ben Bernanke's strong defence of the Fed's bond-buying stimulus before Congress and a spike in U.S. home sales boosted Asian shares, base metals and other riskier assets. Yet, concerns over spending cuts in the United States and a prolonged instability in Europe as elections in Italy failed to produce a strong government capped gains.
Brent crude rose 8 cents to $112.79 a barrel by 0428 GMT, after rising to as much as $113.10. The contract hit a session low of $112.41 a barrel on Tuesday, its weakest since Jan. 24, and settled down $1.73. U.S. oil gained 2 cents to $92.65, after ending 48 cents lower.
"We did get some positive statements from the United States overnight," said Ric Spooner, chief market analyst at CMC Markets. "But as we get close to the end of the month, there is uncertainty over the spending cuts and there are concerns over Europe's growth. All these factors will weigh on oil prices."
Bernanke said Fed policymakers are cognizant of potential risks from their extraordinary support for the economy, including the possibility it might fuel unwanted inflation or stoke asset bubbles. But the risks did not seem material at the moment, he said, adding the central bank has all the tools it needs to retreat from its monetary support.
Bernanke also urged lawmakers to avoid sharp spending cuts set to take effect on Friday, warning that they could combine with earlier tax increases to create a "significant headwind" for the modest economic recovery.
Republicans want to replace the across-the-board sequester cuts by finding other more-targeted spending reductions. But congressional Democrats have put forward a $110 billion plan that includes not only spending cuts but also tax increases, which are opposed by Republicans.
"Even if there is no agreement, the U.S. can probably wing it for another month or so without any material damage," Spooner said. "But the end result will be further fiscal tightening and that will be potentially negative for the United States."
In Europe, a political stalemate in Italy could halt reforms needed to spur growth and help the country cut its massive 2 trillion euro debt pile. Italy is facing a political crisis as the vote cast over the weekend gave none of the political parties a parliamentary majority.
A bearish target at $111.97 remains unchanged for Brent as indicated by its wave pattern and a Fibonacci ratio analysis, while a bearish target at $91.15 remains unchanged for U.S. oil, according to Reuters technical analyst Wang Tao.
Yet, oil drew some support as American Petroleum Institute data showed U.S. crude stockpiles rose less than expected. Crude stocks rose 904,000 barrels in the week to Feb. 22, the data showed. Analysts polled by Reuters had expected a rise of 2.4 million barrels. Official data from the Energy Information Administration (EIA) is due later in the day. (Editing by Himani Sarkar)