Oil set for first weekly decline in seven ahead of US-Iran talks

SINGAPORE, Feb 6 (Reuters) – Oil prices rose more than 1% on Friday after a steep fall the previous day, but were heading for their first weekly drop in nearly two months, as supply concerns eased and investors focused on the outcome of U.S.-Iran talks due later in the day.

Brent crude futures rose 78 cents, or 1.2%, to $68.33 a barrel by 0658 GMT, while U.S. West Texas Intermediate crude was up 80 cents, or 1.3%, at $64.09 a barrel.

Still, Brent was set to end the week 3.3% down with a drop of 4.8% from late-January highs, as WTI headed for a weekly fall of 1.8% and a 3.4% fall from last month’s near six-month high after U.S. President Donald Trump threatened to strike Iran.

Lack of consensus on the agenda for the meeting between the Iran and the United States in Oman has kept investors anxious about geopolitical risk.

Iran wants to stick to nuclear issues, while the United States wants to discuss Iran’s ballistic missiles and support for armed groups in the region.

“The two sides remain well apart, leaving tensions elevated,” ANZ analyst Daniel Hynes said in a note. “This should see the geopolitical risk premium remain in place.”

Any escalation of tension between the two nations could disrupt oil flows, since about a fifth of the world’s total consumption passes through the Strait of Hormuz between Oman and Iran.

Saudi Arabia, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, as does fellow OPEC member Iran.

If the U.S.-Iran talks ease the prospect of conflict in the region, oil prices could decline further.

“We think that geopolitical fears will give way to weak fundamentals,” Capital Economics analysts said in a note, pointing to a recovery in Kazakhstan’s oil output that will help push prices lower, towards $50 a barrel, by the end of 2026.

(Reporting by Florence Tan and Sudarshan Varadhan in Singapore; Editing by Thomas Derpinghaus, Sonali Paul and Clarence Fernandez)