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Oil slipped on Friday and headed for a weekly decline, burdened by the prospect of weaker global growth, higher interest rates and COVID lockdowns in China hurting demand even as the European Union considers a ban on Russian oil that would further tighten supply.

Brent crude was down $2, or 1.85 per cent, at $106.32 a barrel by 1:40 p.m. ET (1740 GMT). U.S. West Texas Intermediate (WTI) crude declined $2.01, or 1.94 per cent, to $101.80.

The International Monetary Fund, which cut its global economic growth forecast, could further downgrade it if Western countries expand their sanctions against Russia over its war against Ukraine, and energy prices rise further, the IMF’s No. 2 official said.

The German government will cut its growth forecast for 2022 to 2.2 per cent from 3.6 per cent, a government source said, while Chinese demand for gasoline, diesel and aviation fuel in April is expected to slide 20 per cent from a year earlier, Bloomberg reported, as many of China’s biggest cities, including Shanghai, are in COVID-19 lockdowns.

U.S. Federal Reserve Chair Jerome Powell on Thursday said a half-point increase to interest rates “will be on the table” at the next Fed policy meeting in May, pushing the dollar to a more than two-year high. A stronger greenback makes oil and other commodities more expensive for those holding other currencies.

“At this stage, fears over China’s growth and overtightening by the Fed, capping U.S. growth, seem to be balancing out concerns that Europe will soon widen sanctions on Russian energy imports,” said Jeffrey Halley, analyst at brokerage OANDA.

Brent hit $139 a barrel last month, its highest since 2008, but both oil benchmarks were heading for weekly declines of nearly 5 per cent.

On the supply side, the Russia-Kazakh Caspian Pipeline Consortium (CPC) is expected to resume full exports from April 22 after almost 30 days of disruptions, sources said.

U.S. oil rigs rose one to 549 this week, their highest since April 2020, according to a report from energy services firm Baker Hughes Co.

Still, ongoing support was provided by supply tightness after disruptions in Libya, which is losing 550,000 barrels per day (bpd) of output, and supply could be squeezed further if the European Union imposes an embargo on Russian oil.

Morgan Stanley raised its third-quarter price forecast for Brent by $10 per barrel to $130 citing a “greater deficit” this year due to lower supply from Russia and Iran, which is likely to outweigh short-term demand headwinds.

“So, while we may slide, there’s a certain point at which we will find support because the fundamentals here, the stakes are just too tight for things to slide very far,” Mizuho executive director of energy futures Robert Yawger said.

An EU source told Reuters this week the European Commission is working to speed up availability of alternative energy supplies, while a senior White House adviser said he is confident Europe is determined to close off or further restrict remaining Russian oil and gas exports.

The Netherlands said it plans to stop using Russian fossil fuels by the end of the year.

European refiners processed 9.04 million barrels per day (bpd) of crude oil in March, down 4 per cent from a month earlier and 4.8 per cent higher than a year earlier, Euroilstock data showed.

U.S. oil refiners, on the other hand, are expected to have about 1.08 million bpd of capacity offline for the week ending April 22, increasing available refining capacity by 47,000 bpd, research company IIR Energy said.

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