Oil prices fell on Friday and were headed for weekly losses of around 3 percent as an energy crunch in Europe threatened to plunge the region into a recession.
Benchmark Brent crude futures fell 1.3 percent to $95.30 a barrel, while WTI crude futures were down 1.4 percent at $89.28.
European natural gas prices continue to climb, posing upside risks to the inflation outlook and threatening to send the continent's economy into recession.
Money markets are now fully pricing in a half percentage point ECB move in September and a 35 percent chance of a bigger 75-basis point move.
A stronger dollar also weighed on prices as traders looked ahead to next week's Jackson Hole economic symposium for cues on how big will future U.S. rate hikes be.
St Louis Fed president James Bullard said he expects a third straight 75-basis-point interest rate hike in September, while San Francisco Fed colleague Mary Daly said that raising rates by 50 or 75 basis points next month would be "reasonable".
Kansas City Fed president Esther George noted that the drop in inflation registered in July was not evidence the underlying problem was fixed.
