UPDATE 7-Oil steadies as U.S. seen unlikely to sanction Russian exports

* U.S. unlikely to block Russian oil if Putin invades -officials

* Iran urges West be realistic in nuclear talks

* U.S. crude stocks rose 6 mln bbls last week - API

* POLL-U.S. crude stocks likely rose last week, products seen down (Updates with settlement prices, adds API data, background)

Feb 23 (Reuters) - Oil prices steadied on Wednesday, holding below 2014 highs, as U.S. officials indicated escalation between Russia and Ukraine was unlikely to result in sanctions on energy supplies from Russia, one of the world’s top oil producers.

Brent crude remained unchanged, settling at $96.84 a barrel, after hitting $99.50, its highest since September 2014 on Tuesday.

U.S. West Texas Intermediate (WTI) crude futures ended up 19 cents to $92.10 a barrel. On Tuesday, WTI hit $96.

Oil prices rose on Tuesday on fears that sanctions imposed by Western nations on Russia, after it sent troops into two breakaway regions in eastern Ukraine, could hit energy supplies.

Sanctions imposed by the United States, the European Union, Britain, Australia, Canada and Japan were focused on Russian banks and elites, while Germany halted certification of a gas pipeline from Russia.

But the United States made it clear that sanctions agreed and those which may be imposed will not target oil and gas flows.

The Biden administration is not expected to target Russia’s crude oil and refined fuel sector with sanctions due to concerns about inflation and the harm it could do to its European allies, global oil markets and U.S. consumers, administration officials told Reuters.

Moscow denies planning an invasion and has described warnings as anti-Russian hysteria. But it has taken no steps to withdraw the troops deployed along Ukraine’s frontiers.

Ukraine declared a state of emergency on Wednesday and told its citizens in Russia to flee, while Moscow began evacuating its Kyiv embassy.

Analysts expect oil prices to continue seeing support from the Russia-Ukraine crisis, with some Western countries promising more sanctions if Russia launches a full invasion.

“The prospect of more conflict in Ukraine should safeguard the geopolitical risk premium,” said Stephen Brennock at brokerage PVM Oil.

The potential return of more Iranian crude to the market weighed on prices, as Tehran and world powers inch closer to reviving a nuclear agreement.

“Nuclear talks in Vienna are reaching a sensitive and important point,” Iran’s foreign minister Hossein Amirabdollahian said on Wednesday.

Yet analysts say there is little chance of Iranian crude returning to the market in the immediate future to ease current supply tightness.

“If a U.S.-Iran deal is reached, it will ease some of the pressure but not enough to stop oil prices inching towards triple digits,” Pratibha Thaker of the Economist Intelligence Unit said.

U.S. crude stocks rose 6 million barrels last week while distillate stocks fell, according to market sources citing American Petroleum Institute figures late Tuesday.

Ahead of government data on Thursday, analysts forecast a 400,000-barrel build in crude and a drawdown in fuel stockpiles. (Additional reporting by Rowena Edwards in London, Sonali Paul and Mohi Narayan in New Delhi ; Editing by Marguerita Choyand Alexander Smith)