By Rowena Edwards
LONDON (Reuters) -Oil prices fell by more than $3 a barrel on Tuesday on fears that an inflation-induced weakening of global economies would soften fuel demand and as Iraqi crude exports have been unaffected by clashes.
Brent crude futures for October settlement were down $3.90, or 3.71%, at $101.19 a barrel by 1340 GMT after touching a session low of $100.90 a barrel.
The October contract expires on Wednesday and the more active November contract was at $99.59, down 3.24%.
U.S. West Texas Intermediate crude dropped by $3.60, or 3.71%, to $93.41.
Inflation is near double-digit territory in many of the world’s biggest economies, a level not seen in almost half a century. This could prompt central banks in the United States and Europe to resort to more aggressive interest rate increases, which could curtail economic growth and weigh on fuel demand.
“The economy will continue to remain slow with the Fed’s aggressive monetary policies. Investors are now waiting for the monthly employment data on Friday,” said Kunal Sawhney, chief executive of equity researcher Kalkine Group.
Prices took a tumble 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 spilled into a second day on Tuesday.
SOMO also said on Tuesday that it can redirect more oil to Europe if required.
More price pressure came from Russia’s fastest-growing oil producer Gazprom Neft saying it plans to double oil production at its Zhagrin field in Western Siberia to more than 110,000 barrels per day.
Meanwhile, the market awaits the meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, on Sept. 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.
The American Petroleum Institute is due to release data on U.S. crude inventories at 4:30 p.m. EDT (2030 GMT) on Tuesday.
U.S. crude oil stockpiles are likely to have fallen in the week to Aug. 26, a preliminary Reuters poll showed on Monday. [EIA/S]
(Reporting by Rowena EdwardsAdditional reporting by Muyu Xu in SingaporeEditing by Louise Heavens and David Goodman)