Oil steadies as markets weigh China stimulus hopes

*

China to ramp up fiscal support for consumption next year

*

API shows US crude stocks fall 3.2 million barrels, sources say

*

Coming up: EIA supply report on Friday

(Updates prices, market activity with commentary; changes byline; previous dateline LONDON)

By Nicole Jao

NEW YORK, Dec 26 (Reuters) - Oil edged lower on Thursday in light holiday trade as hopes for additional fiscal stimulus in China, the world's biggest oil importer, offset by dollar strength.

Brent crude futures fell 19 cents, or 0.26%, to $73.39 a barrel by 12:45 p.m. EST (1745 GMT). U.S. West Texas Intermediate crude was at $69.89, down 0.3%, or 21 cents, from Tuesday's pre-Christmas settlement.

Chinese authorities have agreed to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year, Reuters reported on Tuesday, citing two sources, as Beijing ramps up fiscal stimulus to revive a faltering economy.

"Injecting a stimulus into a nation's economy creates increased demand, and increased demand pushes prices higher," said Tim Snyder, chief economist at Matador Economics.

The World Bank on Thursday raised its forecast for China's economic growth in 2024 and 2025, but warned that subdued household and business confidence, along with headwinds in the property sector, would keep weighing it down next year.

The U.S. dollar continued to edge up higher after hitting a milestone on. A stronger dollar makes oil more expensive for holders of other currencies.

The latest weekly report on U.S. inventories, from the American Petroleum Institute industry group, showed crude stocks fell last week by 3.2 million barrels, market sources said on Tuesday.

Traders will be waiting to see if the official inventory report from the Energy Information Administration confirms the decline. The EIA data is due at 1 p.m. EST (1800 GMT) on Friday, later than normal because of the Christmas holiday.

Analysts in a Reuters poll expect crude inventories fell by about 1.9 million barrels in the week to Dec. 20, while gasoline and distillate inventories are seen falling by 1.1 million barrels and 0.3 million barrels respectively.

Elsewhere, southbound traffic in Turkey's Bosphorus Strait was set to resume on Thursday having been halted earlier in the day after a tanker suffered an engine failure, shipping agent Tribeca said.

($1 = 7.2975 Chinese yuan renminbi) (Additional reporting by Alex Lawler in London, Yuka Obayashi in Tokyo and Emily Chow in Singapore; Editing by Alexandra Hudson, Louise Heavens and Richard Chang)