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Oil prices extended gains on Thursday with support from growing expectations of an interest rate cut from the U.S. Federal Reserve in September, even as the upside was capped by an OPEC+ plan to increase supply and higher U.S. inventories.

Brent crude futures traded up 57 cents or 0.7% at $78.98 a barrel by 0815 GMT. U.S. West Texas Intermediate crude futures were up 62 cents or 0.8% at $74.69.

Oil benchmarks rose more than 1% on Wednesday, recovering after sliding by nearly $8 a barrel over the five sessions through Tuesday.

Nearly two-thirds of economists are now predicting the Fed will cut interest rates in September, according to Reuters' May 31-June 5 poll, offsetting recent bearish supply news.

Lower interest rates decrease the cost of borrowing, which can incentivise economic activity and boost oil demand.

However, the case for rate cuts could be potentially weakened by the U.S. services sector activity, which accounts for the vast majority of the country's economic output, returning to growth in May after a contraction in April.

Prices were still headed for weekly declines of about 3%, weighed down by the latest supply decision from OPEC+, which groups members of the Organization of the Petroleum Exporting Countries (OPEC) and allies.

The group agreed on Sunday to extend most of their oil output cuts into 2025, but left room for voluntary cuts from eight members to be unwound gradually, beginning in October.

"Oil markets have over-reacted to the mildly negative OPEC+ meeting outcome. Demand indicators have certainly softened somewhat recently, but are not falling off a cliff," Barclays analyst Amarpreet Singh wrote in a note.

OPEC Secretary General Haitham Al Ghais defended the recent adjustments to the OPEC+ oil output deal, expressing optimism about continued strong demand.

Russia expects a gradual increase in global oil demand and does not see a peak in the near future, Deputy Prime Minister Alexander Novak said.

Bearish sentiment is also expected to prevail on expectations of weaker demand as inventory builds, said Emril Jamil, senior analyst for crude at LSEG Oil Research.

Separately, Saudi Arabia cut its official selling prices (OSP) for July crude amid falling Middle East crude benchmarks and weaker profit margins for Asian refiners.

Meanwhile, U.S. crude stocks jumped by 1.2 million barrels in the week to May 31 while analysts had expected a drawdown of 2.3 million barrels, data from the U.S. Energy Information Administration showed.