© Reuters.

Investing.com– Oil prices rose slightly in Asian trade on Friday, supported by broader market optimism that easing inflation will see the Federal Reserve cut interest rates by mid-2024. 

But prices remained largely rangebound as signs of higher supplies- amid record-high U.S. production and higher output from the Organization of Petroleum Exporting Countries (OPEC)- signaled that global oil markets may not be as tight as initially expected.

expiring in May rose 0.4% to $82.23 a barrel, while rose 0.3% to $77.74 a barrel by 20:44 ET (01:44 GMT). 

Both contracts were set to clock weekly gains, although these also came as prices recovered from a sharp fall in the prior week. While oil prices did mark some gains in February, they have remained largely rangebound between $75 to $85 a barrel so far in 2024.

Crude gains limited by higher supply outlook 

Reuters data showed that OPEC members produced 26.42 million barrels per day (bpd) in February, an increase of 90,000 bpd from the prior month, even as top producers Russia and Saudi Arabia remained committed to reducing supplies.

Data earlier in the week also showed that U.S. grew for a fifth straight week, while production recovered back to record highs above 13 million bpd towards the end of February.

The readings pointed to oil markets being not as tight as initially hoped for later in 2024. But on the flipside, recent media reports also suggested that the OPEC was committed to maintaining its current pace of supply cuts until the end of the year. 

Geopolitical unrest in the Middle East also remained in play, as the Israel-Hamas war showed little signs of deescalation. Both sides played down prospects of a ceasefire, even as U.S. President Joe Biden called for a truce during the holy Musilim month of Ramadan. 

Demand outlook remains uncertain despite rates cheer 

On the demand front, the outlook for crude also remained uncertain despite the prospect of U.S. interest rate cuts.

data- the Federal Reserve’s preferred inflation gauge- eased as expected in January, driving up some hopes that the Fed will consider lowering rates as inflation cools. This notion triggered a month-end rally in broader financial markets. 

But the reading still remained well above the Fed’s annual target, while several members of the central bank warned that it was in no hurry to begin trimming rates.

Any potential rate cuts are also expected to be accompanied by cooling in the U.S. economy, which paints a weak picture for crude demand.