Oil prices fell on Tuesday, returned some of the gains from the previous session as the market feared that more aggressive rate hikes by central banks could spark a global economic slowdown and soften fuel demand.
Brent crude futures for the October settlement fell 56 cents, or 0.5%, to $104.53 a barrel as of 0620 GMT, after climbing 4.1% on Monday, the biggest gain in more than a month.
The October contract expires on Wednesday and the more active November contract was down 0.4% at $102.57.
West Texas Intermediate (WTI) crude was at $96.86/barrel, down 14 cents, or 0.1%, after gaining 4.2% in the previous session.
Inflation is close to double-digit territory in many of the world’s largest economies, not seen in close to half a century, and this could prompt central banks in the United States and Europe to resort to more aggressive interest rate hikes.
Risk appetite has cooled amid expectations that the Federal Reserve will continue to raise interest rates. The retreat of natural gas prices in Europe also adds uncertainties to the energy crisis picture.
The head of the International Energy Agency (IEA) said on Monday that Russia’s oil production exceeded expectations after the war in Ukraine and put pressure on prices. However, he said Moscow will find it increasingly difficult to maintain production as Western sanctions begin to take effect.
The head of the agency also said that IEA member countries can release more oil from strategic oil reserves (SPR) if they deem it necessary when the current plan expires.
But Monday night’s political violence in Iraq, OPEC’s second-largest producer, supported prices.
Government security forces and militia loyal to Shiite cleric Muqtada al-Sadr clashed around the Green Zone in the capital, Baghdad, where government headquarters and embassies are located. 20 people have been killed in the long-running dispute over the formation of a new government since the last elections.
As a major oil exporter with a production of more than 4 million barrels per day, Iraq’s local situation cannot be said to have had less of an impact on oil prices than Iran.
In addition, the limited supply also provides some support to the prices. Saudi Arabia, the largest producer of the Organization of the Petroleum Exporting Countries (OPEC), raised the possibility of production cuts last week, and sources said the cuts could coincide with increased supply from Iran if it reaches a nuclear deal with the West.
OPEC+, consisting of OPEC, Russia and allied manufacturers, is meeting on September 5 to determine policy.
The American Petroleum Institute (API), an industry group, will release data on US crude inventories on Tuesday, and the Energy Information Administration (EIA), the statistical arm of the US Department of Energy will release officiala datas on Wednesday.
U.S. crude stockpiles likely fell by 600,000 barrels as distillates and gasoline inventories also fell, according to a preliminary survey on Monday.
