Investing.com– Oil prices settled lower Thursday, but notched a second-monthly gain as hopes for tighter supply and fresh hopes for a summer U.S. interest rate cut following data showing inflation continued to trend lower.      

By 14:30 ET (19.30 GMT), the futures fell 0.4% to settle at $78.26 a barrel and the contract fell 0.3% to $81.88 a barrel. Both benchmark wrapped up the February, with second-monthly gain.

In-line inflation data cools fears  

The data released earlier Thursday rose 0.3% on the month and 2.8% on annualized basis in January, matching economists and providing relief for markets following signs of faster inflation last month. 

The core PCE price index, the Federal Reserve’s favorite inflation gauge, rose 0.4% on the month in January, an annual rise of 2.8%.  

Fears of higher rates have been a key weight on oil, given that economic conditions and demand usually deteriorate in high rate environments.

OPEC+ extension hopes, retreating U.S. output stoke tighter market hopes  

Expectations for OPEC and its allies or OPEC+, to extend their cuts into the second-quarter also helped boost sentiment and hope for tighter markets this year. OPEC+ is now widely expected to maintain its current production curbs until end-2024. 

OPEC+ is set to meet in early March to decide whether to extend oil production curbs. In November, the group collectively decided to voluntarily cut 2.2 million barrel per day production in Q1. 

The rising expectations for output cuts come as U.S. output fell slightly from record highs. U.S. crude oil production fell to 13.315 million barrels per day in December, down from November’s record of 13.314 million barrels per day, data from the Energy Information Administration showed on Thursday.

Still, fears of a Chinese demand slowdown grew after a major state-owned producer warned that oil demand in the world’s largest crude importer was expected to remain stagnant this year.

The Middle East conflict, meanwhile, showed no signs of abating, with both Israel and Hamas playing down prospects for a truce in their war in Gaza. 

(Peter Nurse, Ambar Warrick contributed to this article.)