Oil edges up on threat of U.S. issuing new Iran sanctions

Comments by Russian energy minister Alexander Novak that oil producers had cut their output in accordance with a pact agreed in December also helped support prices, analysts said, Reuters reports.

Reuters reported on Thursday that Trump's administration is prepared to roll out new measures against more than two dozen Iranian targets following Tehran's ballistic missile test, according to sources familiar with the matter.

Brent crude futures had risen 21 cents, or 0.4 percent, to $56.77 a barrel by 0358 GMT (10:58 p.m. ET), after settling down 24 cents at $56.56 in the previous session.

Front month U.S. crude futures, also known as West Texas Intermediate, climbed 28 cents, or 0.5 percent, to $53.82 a barrel, after ending Tuesday down 34 cents. For the week, the contract is up a little over 1 percent.

Moves by the U.S. to impose new sanctions on Iran is "something at the back of short-term traders' minds," said Ric Spooner, chief market analyst at Sydney's CMC Markets.

"It's on the risk radar more than it otherwise might have been," he said.

The sources, who had knowledge of the administration's plans, said the package of sanctions was formulated in a way that would not violate the 2015 Iran nuclear deal.

Supply concerns were also raised when Russia's energy minister said global oil output was cut by 1.4 million barrels per day (bpd) last month as part of the deal last year between OPEC and other producers.

"Oil markets have been supported by OPEC and as long as things hold people will look for evidence output curbs have chiseled away at inventories," Spooner said.

Novak also said Russian companies may cut oil production quicker than had been initially agreed with OPEC and that he expected the market to rebalance by the middle of this year.

Oil prices have stabilized about 15 percent higher than they were before OPEC and non-OPEC producers agreed in December to curb output, National Australia Bank said in a note on Friday.

"We now expect oil prices to average around the mid to high $50s in Q1 and Q2, before reaching the low $60s by end-2017 and stabilizing at around those levels in 2018," the bank said.