Oil is falling as concerns about demand return

Oil prices fell on Tuesday after a two-day rally, as concerns returned over weak demand and the possibility of raising interest rates, as crude gave up the support it got from the first cut in production targets announced by OPEC + since 2020.

New closures to curb the outbreak of COVID-19 in China have heightened fears that high inflation and higher interest rates will affect demand. The European Central Bank is widely expected to raise interest rates sharply when it meets on Thursday.

Brent crude futures fell $2.33, or 2.4 percent, to $93.41 a barrel by 0940 GMT.

US West Texas Intermediate crude futures fell from Monday’s trading to $87.02 a barrel, up 15 cents from Friday’s close. Markets were closed in the US on Monday for the Labor Day holiday.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, a group known as OPEC+, decided on Monday to cut the production target for October by 100,000 barrels per day. Prices rose on the Friday before the meeting and on Monday after the decision.

As a result of the US holiday, weekly US inventory data from the American Petroleum Institute and the Energy Information Administration will be released on Wednesday and Thursday, a day later than usual.

The European Central Bank meets on Thursday to discuss raising interest rates. This will be followed by the Federal Reserve meeting on September 21.