Inflation is anticipated to have an impact on fuel demand, which is contributing to a decline in the price of oil.

On Tuesday, oil prices declined, erasing some of the gains made in the previous trading session. This was due to market participants' concerns that more aggressive interest rate hikes from central banks could result in a worldwide economic slowdown and a reduction in the demand for fuel.

After gaining 4.1% on Monday, the largest gain in more than a month, Brent crude futures LCOc1 for October settlement dropped 81 cents, or 0.7%, to $104.28 a barrel as of 03:59 GMT on Tuesday.

This coming Wednesday marks the end of the October contract, while the more active November contract was trading at $102.33, a decrease of 0.6%.

Following a surge of 4.2% in the previous session, the price of U.S. West Texas Intermediate crude CLc1 was reported to be $96.68 per barrel, a decrease of 33 cents, or 0.3%.

Inflation is close to reaching double digits in many of the world's largest economies, a level that has not been seen in almost half a century. This could prompt central banks in the United States and Europe to resort to more aggressive interest rate hikes. Inflation is nearing double digits in many of the world's largest economies.

"In light of the widespread belief that the Federal Reserve would keep raising interest rates, investors' willingness to take risks has diminished.

The decline in the price of natural gas in Europe is another factor that adds uncertainty to the image of the energy crisis "analysts from Haitong Futures were quoted as saying.

According to the president of the International Energy Agency (IEA), Russia's oil production has outperformed forecasts in the wake of the conflict in Ukraine, which has also had the effect of putting downward pressure on prices.

On the other hand, he stated that Moscow, which refers to its efforts in Ukraine as "a special operation," will find it increasingly difficult to maintain output as Western sanctions begin to take effect.

The director of the organization also stated that member countries of the IEA have the ability to release additional oil from their strategic petroleum reserves (SPR) if they deem it required when the existing arrangement comes to an end.

However, prices were boosted by political turmoil that occurred on Monday night in Iraq, which is the second-largest producer in OPEC.

In an ongoing dispute over the formation of a new government since elections were held last year, government security forces and militias loyal to the Shiite cleric Moqtada al-Sadr fought each other near the Green Zone in Baghdad, which is home to government headquarters and embassies. The fighting resulted in the deaths of twenty people.

According to the experts working for Haitong, "Iraq's domestic crisis has no less of an impact on oil prices than Iran does because Iraq is a big oil producer with a production of over 4 million barrels per day."

The limited supply is another factor that is helping to prop up price levels. Last week, Saudi Arabia, the top producer in the Organization of Petroleum Exporting Countries (OPEC), raised the possibility of production cuts. Sources said that this could coincide with an increase in supply from Iran should it clinch a nuclear deal with the West. Saudi Arabia is the top producer in OPEC.

On September 5, a meeting of OPEC+, which includes OPEC as well as Russia and other allied producers, will take place to discuss policy. On Tuesday, the American Petroleum Institute, a trade association, is scheduled to publish data on crude oil inventories held in the United States. The next day, on Wednesday, the Energy Information Administration, the statistical arm of the United States Department of Energy, will do the same.