Oil edges down as inflation expected to impact fuel demand

Oil edges down as inflation expected to impact fuel demand

Oil prices dipped on Tuesday, paring some gains from the previous session, as the market feared that more aggressive interest rates hikes from central banks may lead to a global economic slowdown and soften fuel demand.

Brent crude futures for October settlement dropped 56 cents, or 0.5%, to $104.53 a barrel by 0620 GMT, after climbing 4.1% on Monday, the biggest increase in more than a month.

The October contract expires on Wednesday and the more active November contract was at $102.57, down 0.4%.

U.S. West Texas Intermediate crude was at $96.86 a barrel, down 14 cents, or 0.1%, following a 4.2% rise in the previous session.

IEA members nations could release more oil from strategic petroleum reserves (SPR) if they find it necessary when the current scheme expires, the head of the agency also said.

However, political violence on Monday night in Iraq, OPEC's second-largest producer, supported prices.

Also offering some support to prices is tight supply. Saudi Arabia, top OPEC producer, last week raised the possibility of production cuts, which sources said could coincide with a boost in supply from Iran should it clinch a nuclear deal with the West. OPEC+, comprising OPEC, Russia and allied producers, meets to set policy on Sept. 5.

U.S. crude oil stockpiles likely fell 600,000 barrels with distillates and gasoline inventories also seen down, a preliminary Reuters poll showed on Monday.

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