Oil heads for weekly gain but remains under supply hike pressure

Oil prices edged up on Friday, heading for a second consecutive weekly gain on easing U.S.-China trade tensions, although this was somewhat offset by expectations of higher supply from Iran and OPEC+.

Brent crude futures were up 86 cents, or 1.35%, at $65.40 per barrel at 1214 ET (1614 GMT), while U.S. West Texas Intermediate crude futures rose 94 cents, or 1.5%, to $62.56.

The benchmarks were headed for a weekly gain of 2.3% and 2.5% respectively.

The contracts fell by more than 2% in the previous session on the prospect of an Iranian nuclear deal, which could result in an easing of sanctions that could see Iranian crude return to the global market.

"Expected increases in OPEC+ oil production along with a more probable Iranian nuclear agreement has re-surfaced the bear trade," said Dennis Kissler, senior vice president of trading at BOK Financial.

"Near term, with geopolitical temperatures cooling, a strong seasonal travel demand will be needed in the coming months to counter the expected rises in supplies," Kissler added.

U.S. President Donald Trump said on Thursday the U.S. was nearing a nuclear deal with Iran, with Tehran "sort of" agreeing to its terms. However, a source familiar with the talks said there were still issues to resolve.

ING analysts wrote in a note that a nuclear deal lifting sanctions would allow Iran to increase oil output, resulting in additional supply of around 400,000 barrels per day.

Investor sentiment was boosted this week by the U.S. and China, the world's two biggest oil consumers and economies, agreeing to a 90-day pause on their trade war during which both sides would sharply lower trade duties.

The hefty reciprocal tariffs had raised concern about a sharp blow to global growth and oil demand.