Oil prices edged higher on Friday but were on track for a weekly decline amid fears of sharp interest rate hikes that would slam global growth and hit fuel demand.

Brent crude futures were up 24 cents, or 0.3 per cent, to $91.08 a barrel as of 0315 GMT, but were down 1.9pc for the week so far.

US West Texas Intermediate (WTI) crude futures gained 10 cents, or 0.1pc, to $85.20 a barrel, but were also down 1.9pc on a weekly basis.

“Today’s morning rebound for oil prices can only be described as a short-term correction, as the Fed will raise interest rates by 75bp or 100bp next week,” said Leon Li, an analyst at CMC Markets.

“Although the probability of a 100 bp rate hike is relatively small, it would bring uncertainty to market sentiment. So there is still a risk that oil prices could drop lower next week.”

Both benchmarks are headed for a third consecutive weekly loss, hurt partly by a strong US dollar, which makes oil more expensive for buyers using other currencies. The dollar index ticked down on Friday but held near last week’s high above 110.

Investors are bracing for a US rate hike next week after data showed underlying inflation broadening out, and amid growing concerns of a global recession.

The market was also rattled by the International Energy Agency’s outlook for almost zero growth in oil demand in the fourth quarter due to a weaker demand outlook for China.

“Oil fundamentals are still mostly bearish as China’s demand outlook remains a big question mark and as the inflation-fighting Fed seems poised to weaken the US economy,” Oanda analyst Edward Moya said in a note.

Analysts said sentiment suffered from comments by the US Department of Energy that it was unlikely to seek to refill the Strategic Petroleum Reserve until after fiscal 2023.

On the supply side, the market has found some support on dwindling expectations of a return of Iranian crude, as Western officials played down prospects of reviving a nuclear accord with Tehran.

Commonwealth Bank analyst Vivek Dhar said that supported the bank’s view that oil markets will tighten by the end of the year and Brent will return to $100 a barrel in the fourth quarter.

Oil prices may also be supported in the fourth quarter as Opec+ members are likely to discuss production cuts at its October meeting, and as Europe would face an energy crisis amid uncertainty on oil and gas supply from Russia, added CMC’s Li.