Oil heads for weekly decline as US, Iran extend talks

By Florence Tan and Nicole Jao

Feb 27 (Reuters) - Oil prices inched down on Friday and were on track for a weekly decline after the United States and Iran extended nuclear talks, easing concerns about potential hostilities that could disrupt supply, while OPEC+ may resume output hike at its Sunday meeting.

Brent crude futures lost 5 cents to $70.70 a barrel by 0331 GMT. U.S. West Texas Intermediate crude fell 1 cent to $65.20.

For the week, Brent was heading for a 1.8% decline, while WTI was set to fall around 2.2%, reversing some of the previous week's gains.

"Traders are in wait-and-see mode heading into the weekend with Iran tensions mounting on one hand, and the OPEC+ meeting on Sunday with a likely production hike on the other hand," said June Goh, a senior analyst at Sparta Commodities.

The United States and Iran held indirect talks in Geneva on Thursday over their long-running nuclear dispute to avert a conflict after U.S. President Donald Trump ordered a military build-up in the region.

During the talks, oil prices gained more than a dollar a barrel after media reports indicated the discussions had stalled over U.S. insistence on zero enrichment of uranium by Iran, as well as a demand for the delivery of all 60% enriched uranium to the United States.

However, prices eased after the Omani mediator said the two sides had made progress in their talks.

They plan to resume negotiations with technical-level discussions scheduled next week in Vienna, Omani Foreign Minister Sayyid Badr Albusaidi said in a post on X after the meetings in Geneva.

"While this initially allayed concerns of imminent U.S. military action, it leaves little time to reach a deal before President Trump’s deadline of 1–6 March," said Daniel Hynes, an analyst at ANZ.

Sparta's Goh said the tone from the talks indicated an unwillingness from both parties to concede, adding that the chance of a U.S. strike on Iran is growing but any military action would likely be limited.

To cushion the impact from a possible strike, Saudi Arabia is increasing its oil production and exports as part of a contingency plan, two sources familiar with the plan had told Reuters.

Also, the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, is likely to consider raising its oil output by 137,000 barrels per day for April at the March 1 meeting, sources said, after suspending production hikes in the first quarter.

(Reporting by Florence Tan in Singapore and Nicole Jao in New York; Editing by Sonali Paul and Kim Coghill)