Oil drifts ahead of US-Iran nuclear talks

By Florence Tan

SINGAPORE, Feb 16 (Reuters) - Oil prices traded sideways on Monday ahead of talks between Washington and Tehran, with concerns about Iran-U.S. tensions disrupting oil flows keeping a floor under prices, while OPEC+ leans in favour of resuming output hikes from April.

Brent crude futures LCOc1 edged down 3 cents to $67.72 a barrel by 0156 GMT after closing 23 cents higher on Friday.

U.S. West Texas Intermediate crude CLc1 was at $62.86 a barrel, down 3 cents. There will be no WTI settlement on Monday due to a holiday.

Last week, both benchmarks posted weekly declines with Brent settling down about 0.5%, while WTI lost 1%, as comments on Thursday from U.S. President Donald Trump that Washington could make a deal with Iran over the next month drove down prices on Thursday.

The two countries renewed negotiations earlier this month to tackle their decades-long dispute over Tehran's nuclear programme and avert a new military confrontation, and are due to hold a second round of talks in Geneva on Tuesday.

Iran is pursuing a nuclear agreement with the U.S. that delivers economic benefits for both sides, including energy and mining investments and aircraft purchases up for discussion, an Iranian diplomat was reported as saying on Sunday.

"With both sides expected to hold firm on their core red lines, expectations are low that a deal can be reached and this is likely to be the calm before the storm," IG market analyst Tony Sycamore said.

The U.S. has dispatched a second aircraft carrier to the region and is preparing for the possibility of a sustained military campaign if the talks do not succeed, U.S. officials have told Reuters. Iran's Revolutionary Guards have warned that in case of strikes on Iranian territory, they could retaliate against any U.S. military base.

With U.S.-Iran tensions having bolstered prices, the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, are leaning toward resuming output increases from April following a three-month halt, to meet peak summer demand, Reuters reported.

"The market reacted reasonably well to those reports," Sycamore said.

"If that geopolitical premium or support wasn't there, crude oil would likely be trading sub $60 this morning," he said, referring to WTI.

Activity in global financial markets is expected to be muted on Monday with China, South Korea and Taiwan closed for holidays.