Oil and Gas

CORRECTED-UPDATE 3-Oil steady as U.S. decision on Iran sanctions looms

(Corrects paragraph 2 to make clear Monday’s Brent close was the highest for 3-1/2 years, not 2-1/2.)

* Eyes on Trump move on Iran sanctions that could hit oil supply

* European powers work to save Iran nuclear accord

LONDON, May 4 (Reuters) - Oil prices steadied on Friday, consolidating after recent gains, as global supplies stayed tight and the market awaited news from Washington over possible new U.S. sanctions against Iran.

Brent crude oil was down 10 cents at $73.52 a barrel by 0800 GMT. The benchmark contract hit a 3-1/2 year closing high of $75.17 on Monday.

U.S. light crude was 5 cents lower at $68.38 and set for gain of 0.3 percent for the week.

“Rising geopolitical risks have been a big factor behind oil’s strong rise this year,” ANZ analysts Daniel Hynes and Soni Kumari wrote in a note to clients of the bank.

“The extent of the rally would have been significantly weaker if not for the recent tightness in the market. We expect the market to tighten even further in H2 2018.”

ANZ has a 12-month target for Brent of $80 a barrel.

Reuters technical analyst Wang Tao said the market may retest a price support level at $72.39 per barrel after peaking around resistance at $75.45.

Oil traders are concerned that sanctions against Iran may cut oil supplies.

Iran’s foreign minister said on Thursday U.S. demands to change its 2015 nuclear agreement with world powers were unacceptable, as a deadline set by President Donald Trump for Europeans to “fix” the deal loomed.

Trump has said that unless European allies rectify the “terrible flaws” in the international accord by May 12, he will refuse to extend U.S. sanctions relief for the oil-producing Islamic Republic.

“Prices reflect a premium for Iran uncertainties. Investors are worried about supplies after Iran took a tough stance in its response to the United States,” said Wang Xiao, head of crude research with Guotai Junan Futures.

European powers still want to hand Trump a plan to save the Iran nuclear deal next week. But they have also started work on protecting E.U.-Iranian business ties if the U.S. president makes good on a threat to withdraw.

Iran resumed its role as a major oil exporter in January 2016 when international sanctions against Tehran were lifted in return for curbs on Iran’s nuclear program.

Aside from security concerns, growing U.S. crude supplies are capping price gains.

Surging production in the Permian shale basin is outpacing pipeline capacity, while local refining issues have exacerbated oversupply in the region.

The United States now produces more crude oil than top exporter Saudi Arabia. (Additional reporting by Meng Meng in BEIJING and Henning Gloystein in SINGAPORE Editing by David Evans)