Oil prices were stable on Tuesday as the market balanced supply concerns with fears that an inflation-induced weakening of global economies would soften fuel demand.

Brent crude futures for October settlement fell 9 cents, or 0.09 per cent, to $105 a barrel by 0841 GMT, after climbing 4.1pc on Monday, the biggest increase in more than a month.

The October contract expires on Wednesday and the more active November contract was at $103.03 a barrel, up 0.1pc.

US West Texas Intermediate crude was at $97.18 a barrel, up 17 cents, or 0.18pc, following a 4.2pc rise in the previous session.

Inflation is near double-digit territory in many of the world’s biggest economies, a level not seen in close to a half-century. This could prompt central banks in the United States and Europe to resort to more aggressive interest rate hikes that could curtail economic growth and weigh on fuel demand.

The price fall was capped by the prospect of tighter supplies.

Saudi Arabia last week raised the possibility of production cuts from the Organisation of the Petroleum Exporting Countries (Opec) and allies such as Russia, known as Opec+, which sources said could coincide with a boost in supply from Iran should it clinch a nuclear deal with the West.

The group is due to meet on Sept 5.

“Possible reduction in Opec+ production is the reason why the oil market has thumbed its nose at weakening equities and the strong dollar,” said Tamas Varga of oil broker PVM.

Russia is set to reduce oil and gas condensate production in August by 2pc from July, the Kommersant newspaper said on Tuesday, citing sources familiar with the data, as Gazprom cuts output.

And political violence on Monday night in Iraq, Opec’s second-largest producer, supported prices.

The American Petroleum Institute, an industry group, is due to release data on US crude inventories at 4:30pm EDT (2030 GMT) on Tuesday.

US crude oil stockpiles likely fell 600,000 barrels in the week to Aug 26, with distillates and gasoline inventories also seen down, a preliminary Reuters poll showed on Monday.