By Arunima Kumar

(Reuters) -Oil prices eased on Friday, but were on track to register gains for a second straight week following a large cut in U.S. interest rates and declining global stockpiles.

Brent futures were down 50 cents, or 0.67%, at $74.38 a barrel at 1004 GMT while U.S. WTI crude futures fell 48 cents, or 0.65%, at $71.47.

Still, both benchmarks were up 3.7% and 4% respectively on the week.

Prices have been recovering after Brent fell below $69 for the first time in nearly three years on Sept. 10.

“U.S. interest cuts have supported risk sentiment, weakened the dollar and supported crude this week,” UBS analyst Giovanni Staunovo said.

“However, it takes time until rate cuts support economic activity and oil demand growth,” he added, regarding crude’s more muted performance so far on Friday.

Prices rose more than 1% on Thursday following the U.S. central bank’s decision to cut interest rates by half a percentage point on Wednesday.

Interest rate cuts typically boost economic activity and energy demand, but some also see it as a sign of a weak U.S. labour market.

The Fed also projected a further half-point rate cut by year-end, a full point next year and a half-point trim in 2026.

“Easing monetary policy helped reinforce expectations that the U.S. economy will avoid a downturn,” ANZ Research analysts said.

Also supporting prices were a decline in inventories, which fell to a one-year low last week. [EIA/S]

A counter-seasonal oil market deficit of around 400,000 barrels per day (bpd) will support prices in the $70 to $75 a barrel range during the next quarter, Citi analysts said on Thursday, but added prices could plunge in 2025.

Crude prices were also being supported by rising tensions in the Middle East. Walkie-talkies used by Lebanese armed group Hezbollah exploded on Wednesday following similar explosions of pagers the previous day.

Security sources have said the Israeli spy agency Mossad was responsible, but Israeli officials have not commented on the attacks.

China’s slowing economy also weighed on market sentiment, with refinery output in China slowing for a fifth month in August and industrial output growth hitting a five-month low.