By Laila Kearney

NEW YORK (Reuters) -Oil prices rose slightly on Friday as a spill at Iraq's Basra terminal appeared likely to constrain crude supply, but remained down on the week on fears that hefty interest rate increases will curb global economic growth and demand for fuel.

Brent crude futures settled at $91.35 a barrel, up 51 cents, while U.S. West Texas Intermediate (WTI) crude futures settled at $85.11 a barrel, up 1 cent.

Both benchmarks were down by nearly 2% on the week, hurt partly by the U.S. dollar's strong run, which makes oil more expensive for buyers using other currencies. The dollar index was largely flat on the day but up for its fourth week in five weeks.

In the third quarter so far, both Brent and WTI are down about 20% for the biggest quarterly percentage declines since the start of the COVID-19 pandemic in 2020.

Oil exports from Iraq's Basra oil terminal are being gradually resumed after they were halted last night due to a spillage, which has been contained, Basra Oil Company said.

The spill at the port, which has four loading platforms and can export up to 1.8 mln barrels per day, drove up prices on the prospect of lower global crude supply.

"That definitely threw a scare into the market because the initial report was that those barrels were going to be out of the market for some time," said John Kilduff, partner at Again Capital LLC in New York.

Investors are bracing for a large increase to U.S. interest rates, which could lead to a recession and reduce fuel demand. The Federal Reserve is widely expected to raise its benchmark overnight interest rate by 75 basis points at a Sept. 20-21 policy meeting.

"The increasing likelihood of global recession, as underscored by the recent renewed downturn in equities could continue to provide a limiter of upside (oil) price possibilities into next month and possibly beyond," Jim Ritterbusch of Ritterbusch and Associates said in a note.

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

"Both the IMF and World Bank warned that the global economy could tip into recession next year. This spells bad news for the demand side of the oil coin and comes a day after the IEA forecast (on) oil demand," said PVM analyst Stephen Brennock.

"Recession fears coupled with higher U.S. interest rate expectations made for a potent bearish cocktail."

Other analysts said sentiment suffered from comments by the U.S. Department of Energy that it was unlikely to seek to refill the Strategic Petroleum Reserve until after the 2023 financial year.