Sonali Paul

(Reuters) – Oil prices dropped on Friday. They were expected to fall by nearly 4% over the next week. This was due to the possibility of higher rates, weaker growth, and COVID-19 Lockdowns in China, which are all affecting demand.

Futures fell 0.8% to $107.52 per barrel at 0130 GMT. U.S. West Texas Intermediate crude futures dropped 0.7% to $103.07 per barrel.

The weekly declines for both benchmark contracts were forecasted at 3.7%.

Since Russia invaded Ukraine in February 24, this week has been one of the most stable for trade. Sanctions were imposed that severely cut Russian oil supplies and caused consuming countries to pull a record amount of oil from their emergency stocks. Moscow refers to its actions against Ukraine as “special operations”.

Inflation and economic decline were the main concerns in trading during the second week. The International Monetary Fund cut its forecast for global growth by almost a quarter of a percentage point due to concern about Ukraine.

Yi Gang, China’s central bank governor, stated Friday that China’s second largest economy is not immune from external shocks and was also under pressure by COVID epidemics.

Adding to negative sentiment about oil were comments by Jerome Powell (US Federal Reserve Chairman) on Thursday pointing out that the aggressive rate rises drove up oil prices for customers holding other currencies.

All of this comes with tight supply, and could be even more difficult if Russia is banned from the European Union.

In a note, ANZ Research analysts stated that the “worsening situation in Ukraine” is increasing EU pressure to sanction Russian oil.