Oil prices are going down because inflation is expected to hurt fuel demand.

Oil prices went down on Tuesday, taking back some of what they had gained the day before. This was because the market was worried that more aggressive interest rate hikes by central banks could slow down the global economy and reduce demand for fuel.

By 3:59 GMT on Tuesday, October 3, Brent crude futures LCOc1 for October delivery fell 81 cents, or 0.7%, to $104.28 a barrel. On Monday, they had risen 4.1%, which was the biggest gain in more than a month.

The contract for October ends on Wednesday, and the more active contract for November was trading at $102.33, which was down 0.6%.

The price of a barrel of U.S. West Texas Intermediate crude CLc1 fell by 33 cents, or 0.3%, to $96.68. This came after a 4.2% rise in the previous session.

Inflation is close to double digits in many of the world's biggest economies, which is a level that hasn't been seen in close to 50 years. This could lead central banks in the U.S. and Europe to raise interest rates more quickly.

"People are taking less risks because they think the Federal Reserve will keep raising interest rates.

A drop in natural gas prices in Europe also makes the picture of the energy crisis less clear "Analysts from Haitong Futures said as much.

In part because of the war in Ukraine, Russia's oil production has been higher than expected, said the head of the International Energy Agency (IEA) on Monday. This has also pushed up prices.

But he said that Moscow's actions in Ukraine, which it calls a "special operation," will make it harder and harder to keep up production as Western sanctions start to bite.

When the current plan runs out, the head of the IEA also said that member countries could release more oil from their strategic petroleum reserves (SPR) if they thought it was necessary.

Prices were kept up, though, by political violence in Iraq on Monday night, which is the second-largest producer in OPEC.

In the capital Baghdad, government security forces and militias loyal to Shi'ite cleric Moqtada al-Sadr fought near the Green Zone, where government headquarters and embassies are located. Twenty people were killed in the fights, which are part of a long-running dispute over the formation of a new government since last year's elections.

Analysts at Haitong said, "As a major oil exporter with a daily output of more than 4 million barrels, Iraq's domestic situation has just as much of an effect on oil prices as Iran's."

Tight supply is another thing that helps prices. Last week, Saudi Arabia, which is the top producer in the Organization of the Petroleum Exporting Countries (OPEC), brought up the idea of cutting production. Sources said that this could happen at the same time as an increase in supply from Iran, if that country can reach a nuclear deal with the West.

OPEC, Russia, and other oil producers get together on Sept. 5 to set policy. On Tuesday, an industry group called the American Petroleum Institute will report on crude oil stocks in the United States. On Wednesday, the Energy Information Administration, which is part of the U.S. Department of Energy, will do the same.

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