NEW YORK (Reuters) - Oil futures fell on Friday, with U.S. crude down nearly 3% ahead of a hurricane near the Florida coast that could dampen demand, but prices were still headed for the biggest weekly increase since early July, boosted by an easing of U.S.-China trade rhetoric.

FILE PHOTO: A pump jack operates at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford

Brent crude LCOc1 futures fell 65 cents, or 1.1%, to settle at $60.43 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures settled down $1.61, or 2.8%, at $55.10 a barrel.

Hurricane Dorian gained strength as it crept closer to Florida’s coast on Friday, raising the risk that parts of the U.S. state will be hit by strong winds, a storm surge and heavy rain for a prolonged period after it makes landfall early next week.

“The latest modeling has Hurricane Dorian avoiding the Gulf of Mexico, while raking the entire state of Florida, turning it into a demand destruction event for the energy market rather than a supply disruption event,” said John Kilduff, a partner at Again Capital in New York.

U.S. crude oil output fell for a second straight month in June, dropping by 33,000 barrels per day (bpd) to 12.08 million bpd, the U.S. Energy Information Administration said in a monthly report released on Friday.

In an indication of future production, U.S. energy firms cut 12 oil rigs in the week to Aug. 30, bringing the total count down to 742, General Electric Co's GE.N Baker Hughes energy services firm said on Friday. The rig count declined for the ninth straight month to its lowest level since January last year.

Meanwhile, the Organization of the Petroleum Exporting Countries’ oil output rose 80,000 barrels per day in August, the first monthly increase this year, a Reuters survey found.

OPEC, Russia and other nonmembers, an alliance known as OPEC+, agreed in December to reduce supply by 1.2 million bpd in 2019. Russia’s oil output in August was slightly higher than levels agreed under its output deal with OPEC+, but Moscow is still aiming to comply fully with the deal, RIA and Interfax news agencies cited Energy Minister Alexander Novak as saying.

Oil prices have fallen around 20% since they hit a 2019 peak in April, in part because of concerns that the U.S.-China trade war could hurt the global economy and soften demand for oil.

In August alone, Brent posted a monthly drop of 7.3%, and WTI fell by 6%.

This week, however, WTI gained by 1.7% and Brent by 1.8%, in part due to hopes that trade tensions between the world’s two biggest oil consumers are easing.

Chinese and U.S. trade negotiating teams are maintaining effective communication, China’s Foreign Ministry said on Friday at a daily news briefing in Beijing.

Analysts polled by Reuters slashed price forecasts for Brent to an average of $65.02 in 2019 - the lowest in more than 16 months - citing softening global demand brought on by an economic slowdown and the trade war.

Hedge funds and other money managers cut their net long U.S. crude futures and options positions in the week to Aug. 27 by 20,049 contracts to 197,055, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.