Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018.
Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. Reuters / Nick Oxford

Global benchmark Brent crude tumbled $7 to below $100 a barrel on Tuesday on a strengthening dollar, demand-sapping COVID-19 curbs in top crude importer China, and rising fears of a global economic slowdown.

The sharp drop followed a month of volatile trading in which investors have sold oil positions on worries that aggressive interest rate hikes to stem inflation will spur an economic downturn that will pull the rug out from oil demand.

Brent crude futures were down $7.21, or 6.7%, at $99.89 a barrel by 1:46 p.m. EDT (1746 GMT). U.S. West Texas Intermediate crude was down $7.80, or 7.5%, at $96.30.

Oil prices are facing extreme pressure "as a defensive posture continues with consumer sentiment still in a depressed mode along with a COVID re-surface in China," said Dennis Kissler, senior vice president for trading at BOK Financial.

A record high dollar was triggering more selling liquidation, Kissler added. Oil is generally priced in U.S. dollars, so a stronger greenback makes the commodity more expensive to holders of other currencies.

The dollar index, which tracks the currency against a basket of six counterparts, earlier on Tuesday climbed to 108.56, its highest level since October 2002. Investors tend to view the dollar as a safe haven during market volatility.

Investors have been dumping petroleum-related derivatives at one of the fastest rates of the pandemic era as recession fears intensify. Hedge funds and other money managers sold the equivalent of 110 million barrels in the six most important petroleum-related futures and options contracts in the week to July 5.

Close-to-close volatility on Brent and WTI is at its highest level since early April. Lower liquidity typically results in a more volatile market with drastic price swings.

Renewed COVID-19 travel curbs in China weighed on oil prices too, with multiple Chinese cities adopting fresh restrictions, from business shutdowns to broader lockdowns, in an effort to rein in new infections from a highly infectious subvariant of the virus.

U.S. President Joe Biden will make the case for higher oil production from OPEC when he meets Gulf leaders in Saudi Arabia this week, White House national security adviser Jake Sullivan said on Monday.

However, industry insiders, sources and experts have questioned whether, with current output of at least 10.5 million barrels per day, Saudi Arabia really has another 1.5 million bpd up its sleeve that can be brought online quickly and sustained.

U.S. Treasury Secretary Janet Yellen is in Asia to discuss ways to strengthen sanctions on Moscow, including a price cap on Russian oil to limit the country's profits and help lower energy prices.

International Energy Agency (IEA) Executive Director Fatih Birol said that any price caps on Russian oil should include refined products.

Western sanctions on Russia over the war in Ukraine, which Moscow calls a "special military operation," have disrupted trade flows for crude and fuel.

The Organization of the Petroleum Exporting Countries (OPEC) forecast that world oil demand will rise by 2.7 million bpd in 2023, slightly slower than in 2022. Spare capacity within the OPEC is, however, running low, with most producers pumping at maximum capacity.

The U.S. Energy Information Administration (EIA) forecast a rise in U.S. crude production and petroleum demand in 2022.