LONDON, Aug 23 (Reuters) - Oil prices rose 2% on Friday on a softer dollar but were still set to end the week lower as weaker U.S. employment data raised concerns over the health of the world's largest oil consumer, and renewed ceasefire talks in Gaza eased worries about supply.
Brent crude futures rose $1.38, or 1.8%, to $78.60 a barrel at 1220 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose $1.46, or 2%, to $74.47. Brent futures have fallen about 1.4% so far this week, while WTI lost nearly 3%.
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Both benchmarks hit their lowest since early January this week, after the U.S. government sharply lowered its estimate of jobs added by employers this year through March.
That sparked concern about a potential recession in the U.S. hurting demand in the top oil consuming nation, but some analysts say that was an overreaction to the jobs revision.
The market will be closely monitoring a keynote speech by Federal Reserve chair Jerome Powell scheduled for 1400 GMT on Friday, with the market widely anticipating a rate cut from next month.
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"Alluding to a quarter point cut in September is something already priced in and will receive a lukewarm reaction," PVM Oil analyst John Evans said.
"But a double-decker half point percentage cut goes against how the Fed wishes to manage a controlled move away from tightening," he added.
The US dollar index softened to about 101.45 ahead of the speech, and remained close to the 2024 low of 100.92 it hit on Wednesday, and is headed for a fifth straight week of losses. A cheaper greenback typically lifts demand for dollar-denominated oil from investors holding other currencies.
Morgan Stanley said in a note on Friday that a drawdown in oil inventories has provided oil prices with some support.
"For now, the balance in the oil market is tight, with inventories drawing approximately 1.2 million barrels per day in the last four weeks, which we expect will continue in the balance of [the third quarter]," the bank said.
Recent data from China, the top oil importer, has pointed to a struggling economy and slowing oil demand from refiners. A renewed push for a ceasefire in Gaza between Israel and Hamas has also helped ease supply worries and weighed on oil prices.
U.S. and Israeli delegations started a new round of meetings in Cairo on Thursday to resolve differences over a truce proposal.
Additional reporting Sudarshan Varadhan in Singapore; editing by Jason Neely
