By Scott DiSavino

NEW YORK (Reuters) -Oil prices edged a shade higher on Tuesday as rising demand from the approach of the Northern Hemisphere’s summer driving season and lifting of coronavirus restrictions faced worries that Iran’s possible return to the market will cause a supply glut.

After gaining over 5% in the prior two sessions, Brent futures rose 19 cents, or 0.3%, to settle at $68.65 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 2 cents to settle at $66.07.

That was the highest closes for both benchmarks in a week.

Another factor supporting crude prices was the decline in the U.S. dollar to a 19-week low versus a basket of currencies as inflation worries recede. A weaker dollar makes it less expensive for holders of other currencies to buy commodities priced in dollars, like oil.

The small price moves in oil came as the market waited for direction from weekly U.S. oil inventory reports that are expected to show U.S. crude inventories declined by 1.1 million barrels last week. Trade data from the American Petroleum Institute is due at 4:30 p.m. EDT (2030 GMT) followed by the government’s report on Wednesday morning. [EIA/S] [API/S]

“Oil prices … remain at high levels as the high season for oil demand is approaching and as restrictions are lifted in much of Europe and the United States,” said Louise Dickson, oil markets analyst at Rystad Energy.

Parts of Europe and the United States are recording fewer COVID-19 infections and deaths, prompting governments to ease restrictions. However, in areas such as India – the world’s third-biggest oil importer – infection rates remain high.

Indirect negotiations between the United States and Iran are due to resume in Vienna this week. Talks were resurrected after Tehran and the U.N. nuclear agency extended a monitoring agreement on the Middle Eastern country’s atomic programme.

Analysts have said Iran could provide about 1 million to 2 million barrels per day (bpd) in additional oil supply if a deal is struck and sanctions lifted.

“Crude prices are in wait-and-see mode until the fifth round of negotiations to revive the Iran nuclear deal are done,” said Edward Moya, senior market analyst at OANDA, noting “Energy traders need to know how much Iranian crude is going to hit the market.”

Any increase in supply from Iran would be on top of extra barrels already expected from the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, a group known as OPEC+, which plans to bring back about 2 million bpd of production through July.

“The extra barrels hitting international markets have served as a headwind for Brent, with the US Oil Fund (exchange traded fund) reporting inflows of $104 million on Monday, the largest inflow since August, serving as a tailwind for WTI,” said Bob Yawger, director of energy futures at Mizuho in New York.

The premium of the Brent front-month over the same WTI contract fell to its lowest since November 2020 on Monday and held near that level on Tuesday, while the premium of the WTI front-month over the WTI second-month rose to its highest since February.

(Additional reporting by Ahmad Ghaddar in Londton and Aaron Sheldrick in Tokyo; Editing by Marguerita Choy and David Goodman)