Oil prices extend losses on inflation concerns

SINGAPORE Reuters - Oil prices extended losses on Friday, after hitting their lowest since Russia's February invasion of Ukraine in the previous session, as the market fretted about 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 fell 6 cents.

CMC Markets analyst Tina Teng said that crude oil fell further on demand concerns on a cloudy outlook. If commodities are not pricing in an imminent economic recession, they might be preparing for a stagflation era when the unemployment rate starts to pick up and inflation stays high. After the Bank of England warned of a drawn-out downturn in interest rates since 1995, the recession worries have intensified after it raised interest rates by the most since 1995.

Nonfarm payrolls increased by 250,000 jobs last month, after rising by 372,000 jobs in June, according to the U.S. employment report to be released later in the day.

There are signs of strength in the labour market that could lead to fears of aggressive measures 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 by 7% in July, while China's zero-COVID strategy is pushing recovery in the world's No. They added that the 2 economy was further out.

The global crude oil markets were firmly in a backward state, 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 Russian crude and oil products set to take effect on December 5.

Saudi Arabia and the United Arab Emirates are poised to deliver a significant increase in output if the world is facing a severe supply crisis this winter, according to sources familiar with the thinking of top Gulf exporters.

In September, the oil output goal of the OPEC is expected to be raised by 100,000 barrels per day. The data shows that the hike is one of the smallest since OPEC quotas were introduced in 1982.