Oil dips slightly as concerns grow that rising prices will dampen fuel demand.

On Tuesday, oil prices fell, wiping out some of Monday's gains, as investors fretted that central banks' plans to raise interest rates aggressively would slow the global economy and reduce demand for fuel.

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

This Wednesday, October contracts will expire, while the more active November contracts were trading at $102.33, down 0.6%.

After a 4.2% increase in the prior session, U.S. West Texas Intermediate crude CLc1 fell to $96.68, down 33 cents, or 0.3%.

The inflation rate is close to reaching double digits in many of the world's largest economies, a level not seen in over half a century, which may force the Federal Reserve and European Central Bank to increase interest rates more rapidly.

"Investors are less willing to take risks because they expect the Federal Reserve to keep raising interest rates.

The energy crisis situation is further complicated by the recent drop in European natural gas prices "according to forecasters at Haitong Futures.

The president of the International Energy Agency (IEA) stated on Monday that oil production from Russia has outperformed forecasts in the wake of the crisis in Ukraine, adding to the downward pressure on prices.

However, he warned that as Western sanctions bite, Moscow, which considers its efforts in Ukraine "a special operation," would find it increasingly difficult to maintain output.

When the existing plan ends, the IEA's head also warned, member countries could release extra oil from strategic petroleum reserves (SPR) if they deem it necessary.

But Monday night's political turmoil in Iraq, OPEC's second-largest production, helped keep prices high.

A long-running conflict over the establishment of a new administration since elections last year led to deadly clashes between government security forces and militias loyal to Shi'ite cleric Moqtada al-Sadr around the Green Zone in the capital Baghdad, resulting in the deaths of 20 people.

When compared to Iran, "(Iraq's) domestic situation has no less impact on oil prices," according to analysts at Haitong. This is because Iraq is a big oil exporter, producing more than 4 million barrels per day.

The limited supply also helps to prop up prices. Last week, Saudi Arabia, OPEC's top producer, brought up the idea of production cuts, which may, according to sources, coincide with an increase in supply from Iran should it secure a nuclear deal with the West.

On September 5th, OPEC, Russia, and other producers will get together to discuss policy in an OPEC+ meeting. Information on U.S. oil stocks is expected to be released on Tuesday by the American Petroleum Institute, an industry group, and on Wednesday by the Energy Information Administration, the statistics arm of the U.S. Department of Energy.