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Brent crude futures fell 90 cents, or $1.09%, to $81.78 a barrel
by 1055 GMT. West Texas Intermediate crude (WTI) fell 79 cents,
or $1.03%, to $76.14.
Earlier in the session, both contracts fell by more than $1
while Brent rose by over $1 in Asian trading.
Crude futures on Monday recorded their biggest daily drop in two
weeks after U.S. services industry data indicated a strong U.S.
economy.
The data reinforced the belief among investors that the Federal
Reserve might stick longer with aggressive interest rate rises,
supporting the U.S. dollar index on Tuesday.
A stronger greenback makes dollar-denominated oil more expensive
for buyers holding other currencies, reducing demand for the
commodity.
"Inflationary headwinds could still cause global economic
turbulence in coming months," said Tamas Varga of oil broker PVM,
but added that "China's gradual COVID opening is a tentatively
positive development".
In China, more cities are easing COVID-19-related curbs,
prompting optimism for increased demand in the world's top oil
importer.
The country is set to announce a further relaxation of some of
the world's toughest COVID curbs as early as Wednesday, sources
said.
The market was weighing the production impact of a price cap of
$60/bbl on Russian crude imposed by the Group of Seven (G7), the
European Union and Australia, contributing to market volatility.
The price cap comes on top of the EU's embargo on imports of
Russian crude by sea and similar pledges by the United States,
Canada, Japan and Britain.
Russia has declared its intention not to sell oil to anyone who
signs up to the price cap.
The threat of losing insurance will limit Russia's access to the
tanker market and could reduce crude exports by 500,000 bpd from
February levels, said analysts from Rystad Energy in a note.
Russia's January-November oil and gas condensate rose 2.2% from
a year earlier to 488 million tonnes, according to Deputy Prime
Minister Alexander Novak, who expects a slight output decline
following the latest sanctions.
(Reporting by Rowena Edwards in London, additional reporting by
Muyu Xu in Singapore; editing by Jason Neely)
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