LONDON: Oil fell by almost $1 on Tuesday (May 24) as concerns over a possible recession and China's COVID-19 curbs outweighed tight global supply and expectations of a pick-up in fuel demand with the US summer driving season.
Investment banks including UBS and Goldman Sachs have cut their 2022 China growth outlooks. The head of the International Monetary Fund, meanwhile, said she does not expect a recession for major economies but cannot rule it out.
"Downgraded China GDP growth forecasts and increasing worries about wider virus restrictions in Beijing have pushed oil prices lower," said Jeffrey Halley, analyst at brokerage OANDA.
Brent crude fell 56 cents, or 0.5 per cent, to US$112.86 a barrel by 0815 GMT. US West Texas Intermediate (WTI) crude dropped 72 cents, or 0.7 per cent, to US$109.57.
"Global economic growth is precipitously declining under the collective impact of rising interest rates, Chinese COVID flare-ups and the European war," said Tamas Varga of oil broker PVM.
Beijing is stepping up quarantine efforts to end its month-old outbreak while Shanghai's prolonged lockdown is due to be lifted in a little more than a week.
Oil prices have surged this year, with Brent crude hitting US$139 a barrel in March for its highest since 2008, after Russia's invasion of Ukraine exacerbated supply concerns.
Despite worries about threats to the global economy - a main theme of the Davos meeting taking place this week - tight supply limited the downside for prices.
In a step that analysts say will further tighten the market, the European Union is moving closer to agreeing a ban on Russian oil imports. Such an embargo is likely to be agreed "within days", Germany's economy minister said on Monday.
Another source of support is US gasoline demand. This Memorial Day weekend is the traditional start of the US summer driving season, when gasoline demand usually peaks.
Analysts expect US gasoline and crude inventories to drop in the latest weekly reports, the first of which is from the American Petroleum Institute at 2030 GMT.