Oil prices eased in early trade on Tuesday as concerns over a possible recession and weaker consumption outweighed an expectation of tight global supply and a pick-up in fuel demand in China after Beijing's promises of stimulus.
Brent crude futures for July slid 35 cents, or 0.3 per cent, to $113.07 a barrel by 0122 GMT. US West Texas Intermediate (WTI) crude futures for July delivery dropped 36 cents, or 0.3 per cent, to $109.93 a barrel. Both benchmarks declined by more than $1 earlier in the session.
Brent gained 0.7 per cent on Monday while WTI settled nearly flat.
Multiple threats to the global economy topped the worries of the world's well-heeled at the annual Davos economic summit, with some flagging the risk of a worldwide recession.
International Monetary Fund Managing Director Kristalina Georgieva said she did not expect a recession for major economies but could not rule one out. "Investors were selling off as they expected higher oil prices to dent consumption for fuels worldwide," said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.
"But lingering concerns over tight global supply and hopes for demand recovery in China were providing some support," he said, predicting Brent to stay within a boxed range of $105-$115 a barrel for a while.
The world is facing an oil supply crunch with most companies afraid to invest in the sector as they face green energy pressures, the head of Saudi Aramco told Reuters, adding it cannot expand production capacity any faster than promised.
China, the world's top oil importer, will broaden its tax credit rebates, postpone social security payments and loan repayments, roll out new investment projects and take other steps to support the economy, state television quoted the cabinet as saying on Monday.
Shanghai, China's commercial hub, aims to normalise life from June 1 as its coronavirus caseloads decline, though rising new Covid-19 cases in Beijing raised concerns for further curbs.
Meanwhile, the European Union will likely agree an embargo on Russian oil imports "within days," according to its biggest member Germany, as Moscow said it saw its economic ties growing with China after being isolated by the West over its invasion of Ukraine.