(Reuters) -Oil prices settled 2% lower on Tuesday, extending the previous session’s almost 2% decline, as recession fears and a flare-up in COVID-19 cases in China raised concerns over global demand.

World Bank President David Malpass and International Monetary Fund Managing Director Kristalina Georgieva warned on Monday of a growing risk of global recession and said inflation remained a continuing problem.

Brent crude settled down $1.90, or 2%, to $94.29 a barrel while U.S. West Texas Intermediate crude settled down $1.78, or 2%, to $89.35.

“There is growing pessimism in the markets now,” said Craig Erlam of brokerage OANDA.

Oil surged early this year, bringing Brent close to its record high of $147 as Russia’s invasion of Ukraine added to supply concerns, but prices have slid on economic fears.

U.S. crude oil stockpiles were expected to have risen last week after having fallen the prior two weeks, a preliminary Reuters poll showed on Tuesday.

Fears of a further hit to demand in China also weighed. Authorities have stepped up coronavirus testing in Shanghai and other large cities as COVID-19 infections rise again.

“From an economic perspective, it seems like China’s throwing the baby out with the bathwater by continuing to lock down its population to lower cases,” said John Kilduff, partner at Again Capital LLC in New York.

Oil also came under pressure from a strong dollar, which hit multi-year highs on worries about interest rate increases and escalation of the Ukraine war. [USD/]

A strong dollar makes oil more expensive for buyers with other currencies and tends to weigh on risk appetite.

Losses were limited, however, by a tight market and last week’s decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together known as OPEC+, to lower their output target by 2 million barrels per day.

 

President Joe Biden is re-evaluating the U.S. relationship with Saudi Arabia after OPEC+ announced last week it would cut oil production, White House national security spokesman John Kirby (NYSE:KEX) said on Tuesday.

“An undersupply is even looming next year because the production cut is supposed to apply until the end of 2023, according to the OPEC+ decision,” a Commerzbank (ETR:CBKG) report said.

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