By Yuka Obayashi

TOKYO (Reuters – Oil prices dropped in the early trading session Tuesday due to concerns about a potential recession and weaker consumer demand. However, there was still a lot of optimism regarding tight global supplies and a rebound in China’s fuel demand following Beijing’s stimulus promises.

Futures July fell 35 cents or 0.3% to $113.07 per barrel at 0122 GMT. U.S. West Texas Intermediate crude futures dropped 36c, or 0.3% to $109.93 per barrel for July delivery. The benchmarks fell by over $1 in the previous session.

WTI was almost flat while Brent rose 0.7% Monday.

At the annual Davos economic Summit, many threats to global economies topped the list of worries expressed by the wealthy. Some also warned about the danger of a global recession.

KristalinaGeorgieva, International Monetary Fund’s Managing Director, stated that she didn’t expect majoreconomies to experience a recession but couldn’t rule out one.

Toshitaka Takawa, an analyst with Fujitomi Securities Co Ltd. stated that investors were selling as they anticipated higher oil prices to reduce fuel consumption worldwide.

He said that lingering worries over tight supply in the global market and hope for recovery of demand from China had provided some support. Brent will remain within the boxed range $105-$115 per barrel for a time.

As they are facing green energy pressures and a tight oil supply, most businesses in this sector will be reluctant to invest. Saudi Aramco (TADAWUL) stated to Reuters that it could not increase production speed faster than what was promised.

China is the top global oil importer and will expand its tax credit rebates.

Shanghai, China’s largest commercial city, plans to restore normality in its population starting June 1, as coronavirus cases drop. But, concerns have been raised about rising COVID-19 levels in Beijing.

According to Germany, its largest member, an embargo against Russian oil imports will probably be in place “within days”. This is because Moscow claimed that its economic relations with China were growing, after it was isolated from the West by its invasion.