Oil prices on track for near 4% weekly decline on demand concerns

Oil prices fell on Friday, heading for a drop of nearly 4% for the week, burdened by the prospect of rate hikes, weaker global growth and COVID-19 lockdowns in China hurting demand, even as the European Union weighed a ban on Russian oil.

Brent crude futures slid 81 cents, or 0.8%, to $107.52 a barrel at 0130 GMT, while U.S. West Texas Intermediate (WTI) crude futures declined 72 cents, or 0.7%, to $103.07 a barrel.

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Both benchmark contracts were headed for weekly declines of around 3.7%.

This has been the least volatile week of trade since Russia launched its invasion of Ukraine on Feb. 24, sparking sanctions that cut Russian oil supply and led consuming nations to release a record volume of oil from emergency stockpiles. Moscow calls its actions in Ukraine a "special operation".

Concerns about the Ukraine conflict stoking inflation and denting economic growth dominated trading in the second half of the week, with the International Monetary Fund slashing its global growth forecast by nearly a full percentage point.

China`s central bank governor Yi Gang said on Friday that the world`s second-largest economy was not immune to external shocks, and also faced pressure from COVID outbreaks.

Adding to negative sentiment for oil, comments from U.S. Federal Reserve Chairman Jerome Powell on Thursday pointing to aggressive rate increases drove up the U.S. dollar, which makes oil more expensive for buyers holding other currencies.

But all of that comes in a tight market, which could face even shorter supply if the European Union goes ahead with a ban on Russian oil.

"The worsening situation in Ukraine is increasing pressure on the EU to sanction Russian oil," ANZ Research analysts said in a note.