Fears of a recession cause oil to fall further

Oil prices dipped in early trade on Friday, extending the week's losses, as fears of rapid interest rate hikes choking the global economy and decreasing fuel demand outweighed worries over a shortage.

Brent oil futures decreased 22 cents, or 0.2%, to $90.62 a barrel as of 00:52 GMT, after plunging 3.5% to a one-week low in the prior session.

Futures for U.S. West Texas Intermediate (WTI) crude dropped 25 cents, or 0.3%, to $84.85 a barrel, following a decline of 3.8% in the previous session.

ANZ commodities analysts noted in a client note, "Crude oil fell as the market refocused on the weakening economic backdrop."

Both indices are on track for a third consecutive weekly decrease, slowed in part by a strong U.S. currency that makes oil more expensive for foreign purchasers. Friday saw a modest decrease in the dollar index, but it stayed close to last week's high of over 110.

This week, the market was also rattled by the International Energy Agency's prediction of a near-zero increase in oil demand in the fourth quarter due to China's dismal demand outlook.

"Oil fundamentals remain largely adverse as China's demand outlook remains uncertain and the inflation-fighting Federal Reserve appears prepared to harm the U.S. economy," said OANDA analyst Edward Moya.

According to observers, the mood was severely affected by the U.S. Department of Energy's remark that it was unlikely to seek to refill the Strategic Petroleum Reserve before fiscal year 2023.

On the supply side, the market has gained some support from declining expectations of a return of Iranian crude, as Western officials have downplayed the probability of resuming nuclear negotiations with Tehran.

This reinforced the estimate of Commonwealth Bank analyst Vivek Dhar that oil markets will tighten by the end of the year and Brent will return to $100 per barrel in the fourth quarter.