Oil eased as U.S. and Iranian negotiators explored a phased deal to reopen the world’s most important energy shipping route.

Brent futures traded near $105 a barrel, retreating slightly from a two-day surge fueled by supply concerns and hawkish rhetoric. The two countries were said to be pushing for a breakthrough that would see Tehran reopen the Strait of Hormuz and Washington lift its blockade of Iranian ports.

Still, the two warring sides have appeared close to a deal many times before, only for talks to collapse. Prices remained set for a weekly gain, with signs of tightness across markets for real-world barrels. Many traders were hesitant to shift their positions until they see a meaningful increase in supplies.

A White House official said that President Donald Trump remained open to talking with Iran but stressed the U.S. didn’t need to negotiate because it was in a strong position as a result of its sanctions campaign and the blockade.

“A similar deal has been announced so many times before, and we have seen little traction on it,” said Emily Ashford, head of energy research at Standard Chartered Bank. “Plus, even if we saw some diplomatic breakthrough, that doesn’t immediately restore disrupted flows, doesn’t normalize shipping, or boost dwindling inventories, or improve confidence.”

All week, crude prices have been buffeted by mixed signals on the outlook for peace, indications of a pick-up in Middle East flows and speculation that the U.S. may ban diesel exports. For the year, Brent remains more than 70% higher, adding to inflationary pressures.

While front-month futures retreated on Friday, some widely tracked metrics pointed to elevated concerns about near-term supplies. Among them, Brent’s prompt spread — the difference between its two nearest contracts — has widened to more than $6.50 a barrel, from less than $1 at the end of last month. The bullish pattern, known as backwardation, is the hallmark of a tight market.

Other signs include the record premiums traders paid on Thursday to secure prompt barrels at the main U.S. crude-storage hub in Cushing, Oklahoma. In Europe, Dated Brent — a critical physical-market indicator — has been trading at a wide premium to futures. Some European refiners were told earlier this month they would be allocated no crude in October under long-term agreements with Saudi Arabia, after the kingdom’s East-West pipeline was shut because of attacks.

Persian Gulf suppliers have managed to slip crude through Hormuz, but risks to shipping remain. A cargo vessel was reportedly on fire and adrift after being struck by an unknown projectile earlier this week. Meanwhile, Saudi Arabia intercepted missiles fired toward the Red Sea port of Yanbu and the city of Taif on Thursday, as Iran-backed Houthi militants launched more strikes.

“The physical market remains tight and the underlying plumbing is still creaking,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank. “Adding to this, elevated fuel prices, surging tanker and insurance rates and the market is far from anything that resembles normality.”

In fuel markets, President Trump’s economic advisers are analyzing the ramifications of a potential short-term ban on American diesel exports as prices for the essential transport fuel surge to record levels.

Market participants remain skeptical of such a move. While a potential ban would slash domestic prices for the fuel at the outset, traders and analysts say any relief is likely to be short-lived.

—With assistance from Lorelei Smillie.

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