Oil prices rise on rate cut cheer, OPEC+ soothes oversupply fears

Investing.com-- Oil prices rose in Asian trade on Friday, extending a mid-week rebound after OPEC+ members sought to reassure markets over potential supply increases, while traders welcomed rate cuts in Canada and Europe.

Still, oil markets were nursing a loss for the week, after the Organization of Petroleum Exporting Countries and allies (OPEC+) signaled at its latest meeting that it could begin scaling back its production cuts later this year.

Brent oil futures expiring in August rose 0.2% to $80.07 a barrel, while West Texas Intermediate crude futures rose 0.4% to $75.56 a barrel by 21:00 ET (01:00 GMT). Both contracts were set to lose over 1% this week, after they plummeted to four-month lows.

OPEC+ members clarify supply increases not a given

Energy ministers of Saudi Arabia, the United Arab Emirates and Russia said on Thursday that weakness in the market could see the cartel still tighten supply, Reuters reported, citing comments made at a St. Petersburg conference.

The comments come after the OPEC+ over the weekend said it will maintain 3.6 million barrels per day of cuts until end-2024. But it also outlined detailed plans for scaling back 2.2 million bpd of cuts from October 2024 to September 2025.

The news walloped oil prices, pushing them to four-month lows as traders feared potential oversupply from higher production, especially if demand worsens in the coming months.

Rate cut cheer helps oil trim weekly losses

But crude prices were trading well above four-month lows, having trimmed a bulk of their losses on optimism over interest rate cuts. 

A swathe of weak U.S. economic readings ramped up concerns over worsening demand. But they also pushed up expectations that the Federal Reserve will begin trimming rates by September.

The Fed is set to meet next week and is set to keep rates steady, for now.

Interest rate cuts by the European Central Bank and the Bank of Canada further ramped up optimism over looser monetary conditions this year.

Lower interest rates are expected to spur an eventual recovery in economic activity, which in turn is expected to support oil prices. 

U.S. fuel demand is also set to pick up in the coming weeks, with the onset of the travel-heavy summer season.