General view of oil tanks and the Bayway Refinery of Phillips 66 in Linden, New Jersey, U.S., March 30, 2020.
General view of oil tanks and the Bayway Refinery of Phillips 66 in Linden, New Jersey, U.S., March 30, 2020. Reuters / Mike Segar

Oil prices fell 2% on Tuesday after soaring by more than $5 barrel in the previous session, weighed by fears that an economic slowdown will hit oil demand, though tight supply and a weaker dollar curbed some losses.

Brent crude futures for September settlement were down $1.64, or 1.5%, at $104.63 a barrel by 1328 GMT. The contract rose 5.1% on Monday, the biggest percentage gain since April 12.

WTI crude futures for August delivery fell by $1.63, or 1.6%, to $100.97 a barrel. The contract climbed 5.1% on Monday, the largest percentage gain since May 11.

The August WTI contract expires on Wednesday, and the more actively traded September contract was at $97.50 a barrel, down $1.92, or 1.9%.

The International Monetary Fund on Tuesday warned that any Russian action to stop supplying Europe with gas would trigger economic contractions of more than 5% over the next year in the Czech Republic, Hungary, Slovakia and Italy, the Financial Times reported.

Russia's Gazprom told customers in Europe it cannot guarantee gas supplies because of "extraordinary" circumstances, according to a letter seen by Reuters.

Expectations for an increase in U.S. crude inventories also weighed on prices. A preliminary Reuters poll showed that U.S. crude and distillate supplies may have risen last week, while gasoline stockpiles likely fell.

Oil prices have whipsawed between concerns over supply as Western sanctions on Russian crude and products over Ukraine disrupt trade flows, and worries that central bank efforts to tame inflation may trigger a demand-destroying recession.

U.S. President Joe Biden visited top oil exporter Saudi Arabia last week, hoping to strike a deal on an oil production boost to tame fuel prices.

However, officials from Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), did not give clear assurances an output increase was secured.

The kingdom's foreign minister said on Tuesday that he saw no shortage of oil in the market, but a lack of oil refining capacity, making it necessary to invest in more to process crude into various products.

"Prices climbed aggressively as the tight state of affairs on the supply front shifted back into the spotlight," Stephen Brennock from brokerage PVM said.

Oil prices were also backed by a softer U.S. dollar on Tuesday, which stood around a one-week low, making greenback-dominated oil slightly cheaper for buyers holding other currencies.