Oil prices fell more than 1 per cent in a volatile week on Thursday as economic worries and fears of a recession gripped global financial markets, outweighing supply concerns and geopolitical tensions in Europe. Brent crude futures were down $1.25, or 1.2 per cent, at $106.26 a barrel by 0303 GMT. West Texas Intermediate crude futures fell $1.24, or 1.2 per cent, to $104.47 a barrel.

This week, oil prices and global financial markets came under pressure on jitters over rising interest rates, the strongest dollar in 20 years on fears of inflation and a possible recession. The prolonged COVID-19 lockdown in China, the world’s largest crude oil importer, also affected the market.

Howie Lee, an economist at OCBC Bank in Singapore, pointed to strong US consumer price index (CPI) data on Wednesday. Headline US CPI rose 8.3 per cent in the 12 months to April, reaffirming concerns that interest rates would need to rise quickly.

However, supply concerns sparked by Russia’s invasion of Ukraine boosted the market, with prices up more than 35 per cent so far this year. Russia is a major supplier of crude oil and fuel to the EU, and an impending oil ban could further tighten global supplies, supporting prices.

The EU is still haggling over the details of the Russian embargo. The vote, which required unanimous support, was delayed because Hungary opposed the ban. After all, it would cause too much damage to its economy. Oil prices rose 5 per cent on Wednesday after Russia sanctioned 31 companies in countries that imposed sanctions on Moscow following the Ukrainian invasion.

That rattled markets as gas flow from Russia to Europe through Ukraine fell by a quarter. This is the first-time exports through Ukraine have been disrupted since the invasion. Fears of demand destruction in China have capped price gains as the country tries to contain the spread of the coronavirus.

US commercial crude inventories rose last week as US strategic inventories released a record amount of oil. Still, gasoline inventories fell ahead of a summer-driven peak demand season, the US Energy Information Administration said Wednesday.