SINGAPORE – Oil prices extended losses on Friday, after hitting their lowest since before Russia’s February invasion of Ukraine in the previous session, as the market fretted over the impact of inflation on global economic growth and demand.

Brent crude dropped 10 cents, or 0.1%, to $94.02 a barrel by 0047 GMT, while U.S. West Texas Intermediate crude was at $88.48 a barrel, down 6 cents.

“Crude oil fell further on demand concerns on a cloudy economic outlook,” CMC Markets analyst Tina Teng said. “If commodities are not pricing in an imminent economic recession, they might be preparing for a ‘stagflation’ era when the unemployment rate starts picking up and inflation stays high.”

Recession worries have intensified following the Bank of England’s warning of a drawn-out downturn after it raised interest rates by the most since 1995. Investors are focused on the U.S. employment report to be released later in the day, which is expected to show nonfarm payrolls increased by 250,000 jobs last month, after rising by 372,000 jobs in June. read more

Any signs of strength in the labour market could feed into fears of aggressive steps by the Fed to curb inflation. “There are signs that high prices have taken the edge off gasoline and distillate demand,” ANZ analysts said in a note. U.S. gasoline demand fell around 7% on year in July while China’s zero-COVID strategy is pushing recovery in the world’s No.2 economy further out, they added.

Still, the global crude oil markets remained firmly in backwardation, where prompt prices are higher than those in future months, indicating tight supplies. Supply concerns are expected to ratchet up closer to winter with the European Union sanctions banning seaborne imports of Russian crude and oil products set to take effect on Dec. 5.

OPEC leaders Saudi Arabia and the United Arab Emirates stand ready to deliver a “significant increase” in output should the world face a severe supply crisis this winter, sources familiar with the thinking of the top Gulf exporters said. For September, OPEC+ is set to raise its oil output goal by 100,000 barrels per day. The hike is one of the smallest since OPEC quotas were introduced in 1982, OPEC data shows.

Reporting by Florence Tan; Editing by Himani Sarkar