Oil prices held steady on Friday, heading for a second straight weekly gain as U.S.-China trade tensions eased, although a potential return of Iranian supplies capped gains.

Brent crude futures were down 1 cent at $64.52 a barrel by 0326 GMT. U.S. West Texas Intermediate crude was up 2 cents at $61.64.

Both contracts fell more than 2% in the previous session after selling off on the growing prospect of an Iran nuclear deal.

President Donald Trump has said the U.S. is close to 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 be resolved.

A nuclear deal that lifts sanctions would ease supply risks, allowing Iran to boost oil production and find more willing buyers for its oil, ING analysts wrote in a note. That could lead to additional supply of about 400,000 barrels per day (bpd), they said.

Despite the potential supply squeeze, both Brent and WTI are up 1% so far this week, after surging earlier in the week. Sentiment was boosted after the U.S. and China, the world's two largest oil consumers and economies, agreed to a 90-day pause in their trade war under which both sides will sharply lower tariffs. The tit-for-tat Sino-U.S. tariffs have raised concerns about a sharp hit to global growth and oil demand.

Analysts at BMI, a unit of Fitch Solutions, maintained their forecast for Brent to average $68 a barrel in 2025 and $71 a barrel in 2026, down from $80 a barrel in 2024, citing trade policy uncertainty on the price outlook.

"While the 90-day cooling-off period still leaves room for further progress in lowering trade barriers on both sides, longer-term trade policy uncertainty should cap price upside," the analysts said in a research note.

Adding to the market's concerns is an expected surplus. The International Energy Agency on Thursday raised its 2025 global supply growth forecast by 380,000 barrels per day, as Saudi Arabia and other OPEC+ members end production cuts.

The IEA also projected a surplus for next year, despite a slight upward revision of its 2025 global oil demand forecast of 20,000 barrels per day.

Investors are also watching for signs of interest rate cuts by the Federal Reserve, which could boost the economy and oil demand.

Earlier this week, data from the U.S. Energy Information Administration showed a bigger-than-expected jump in crude stockpiles, raising demand concerns in the world's largest oil consumer. (Newsmaker23)

Source: Reuters