Oil prices retreated slightly on Thursday after gaining more than $3 in the prior session, with a strong dollar capping oil demand from buyers using other currencies and concerns over the faltering economic outlook clouding market sentiment.

Brent crude futures fell 41 cents, or 0.5 percent, to $88.91 per barrel by 0337 GMT while US crude futures dropped by 35 cents, or 0.4pc, to $81.80.

Both benchmarks had rebounded in the prior two sessions after reaching nine-month lows this week after a temporary dive in the dollar index and a larger-than-expected drawdown of US fuel inventory raised hopes of a consumer demand recovery.

However, the dollar index trended upward again on Thursday, dampening investor risk appetite and stoking fears of a global recession.

The Bank of England said it is committed to buying as many long-dated government bonds, known as gilts, as needed between Wednesday and Oct 14 to stabilise its currency after the British government’s budgetary plans announced last week caused the sterling to tumble.

Goldman Sachs cut its 2023 oil price forecast on Tuesday, citing expectations of weaker demand and a stronger US dollar, but said global supply disappointments reinforced its long-term bullish outlook.

In China, the world’s biggest crude oil importer, travel during the week-long national holiday is set to hit the lowest level in years as Beijing’s persistent zero-Covid rules prompt people to stay at home and economic woes dampen spending.

Citi economists have lowered their China GDP forecast from 5pc year-on-year growth to 4.6pc for the fourth quarter of 2022.

“Stringent zero-Covid measures and a weak property sector continue to cloud growth prospects,” Citi analysts wrote in a note on Wednesday.

On the other side of the world, the European Union proposed a new round of sanctions against Russia over its invasion of Ukraine, including tighter trade restrictions, more individual blacklistings and an oil price cap for third countries.

But the bloc’s 27 member countries will need to overcome their own differences to implement them.

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