HOUSTON: Oil prices fell more than $7 a barrel on Tuesday, the steepest decline in about a month, on fears that an inflation-induced weakening of global economies would soften fuel demand and as unrest in Iraq has failed to put a dent in the OPEC nation's crude exports.
Brent crude futures for October settlement were down $7.12, or 6.8 percent, at $97.97 a barrel by 1620 GMT after touching a session low of $97.91 a barrel.
The October contract expires on Wednesday and the more active November contract was at $97.10, down 5.7 percent.
U.S. West Texas Intermediate crude dropped by $6.10, or 6.3 percent, to $90.93.
Inflation is near double-digit territory in many of the world's biggest economies. This could prompt central banks in the United States and Europe to resort to more aggressive interest rate increases, which could slow economic growth and weigh on fuel demand.
"Investors are now waiting for the monthly employment data on Friday" said Kunal Sawhney, chief executive of equity researcher Kalkine Group.
Prices tumbled after comments from Iraq's state-owned marketer SOMO that the country's oil exports are unaffected by unrest, said UBS analyst Giovanni Staunovo. Baghdad's worst fighting for years between Shi'ite Muslim groups continued for a second day. Still, SOMO said it can redirect more oil to Europe if required.
Prices felt more pressure when Russia's fastest-growing oil producer Gazprom Neft said it plans to double oil production at its Zhagrin field in Western Siberia to more than 110,000 barrels per day.
Investors will watch the meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, on September 5.
Saudi Arabia last week raised the possibility of production cuts from OPEC+, which sources said could coincide with a boost in supply from Iran should it clinch a nuclear deal with the West.
"I think the market is torn between recession and Covid-19 lockdown fears pressuring prices downward and concerns of lack of ample supply pressuring prices upward. The dilemma is deciding which issue is going to take precedence," said Andrew Lipow, president of Lipow Oil Associates in Houston.
The American Petroleum Institute is due to release data on U.S. crude inventories on late Tuesday. U.S. crude oil stockpiles are likely to have fallen in the week to Aug. 26, a preliminary Reuters poll showed on Monday.