Oil down as Iran deal eyed; U.S. crude in for best week in four years

NEW YORK (Reuters) - Oil fell on Friday as fears about the disruption of Middle East crude shipments from Yemen's conflict eased, and focus turned to the likelihood of an Iranian nuclear deal by next week that could put more supply on the market.

But prices were still headed for a second straight week of gains, with U.S. crude on track to its best week since 2011, reflecting the ground made by market bulls from six-year lows hit earlier this month.

Benchmark Brent oil and U.S. crude were down more than 2 percent in New York's morning trade after reduced threats to the region's oil facilities and traffic from the Saudi-led air strikes in Yemen.

Brent was down $1.30 at $57.89 a barrel by 11:45 a.m. EDT. U.S. crude slid $1.40 to $50.03.

For the week, Brent was up more than 4 percent and U.S. crude 9 percent higher, after gains from earlier sessions when the dollar was weaker.

Western nations brokering a nuclear deal for Iran indicated they may achieve before the end of March some sort of agreement that Tehran hopes will lift sanctions curbing its oil exports.

Tehran is keen to recover market share lost under the U.S.-led sanctions that have restricted its crude exports to just 1 million barrels per day from 2.5 million bpd in 2012.

British Foreign Secretary Philip Hammond said on Friday parties at the nuclear talks in Lausanne, Switzerland were "better than halfway" in terms of areas where they were close to agreement.

France's Foreign Minister Laurent Fabius concurred there had been progress but said the focus was on getting the content for the deal right, rather than meeting the deadline.

"Both sides have a lot of skin in the game in terms of the pressure to deliver something, so we're probably going to hear noise that they have a deal or are close enough but will have to postpone to another deadline," said John Kilduff, partner at New York energy hedge fund Again Capital.

Oil had jumped around 5 percent on Thursday on fear the conflict in Yemen could disrupt cargoes on the neighboring Bab el-Mandeb Strait, where 3.8 million bpd of crude and oil products flow.

But influential Wall Street bank Goldman Sachs said Yemen was only a small crude exporter, and oil tankers could avoid passing its waters to reach their ports of destination.

(Additional reporting by Christopher Johnson in London and Henning Gloystein and Keith Wallis in Singapore; Editing by Marguerita Choy)