Oil prices were steady on Friday ahead of the long U.S. holiday weekend, although investors kept tabs on hopes for a prolonged de-escalation in tensions between the U.S. and Iran.

Brent crude futures, the global oil benchmark, was higher by 0.2% at $71.96 a barrel at 05:21 ET (09:21 GMT), while U.S. West Texas Intermediate crude futures were little changed at $68.66 a barrel.

Traders have unwound some geopolitical risk premium following the signing of an interim Middle East peace deal last month, with the prospect of improving Gulf crude flows reinforcing expectations of ample near-term supplies. 

Investors continued to monitor negotiations between Washington and Tehran after U.S. President Donald Trump said he believed Iran had "agreed to just about everything we need," signaling confidence that discussions were making progress.

However, the Wall Street Journal reported that Tehran has resisted a proposal to renounce its claims over the Strait of Hormuz in exchange for the release of billions of dollars in frozen Iranian funds. The report said Washington had offered financial incentives, including access to frozen assets, to secure unrestricted passage through the strategic waterway, although Iran has so far rejected the proposal.

Control of the strait, which Tehran effectively shuttered following the onset of a joint U.S.-Israeli assault in late February, has become a key sticking point in peace talks. However, media reports have indicated that shipping activity in the narrow waterway is showing some signs of recovery.

Oversupply concerns weigh

ANZ said a recent build-up in short positions has been a major driver behind a weakening in crude futures, although some investors have pared bearish bets ahead of the U.S. Independence Day weekend.

The bank said Brent’s futures curve remains in contango, with prompt prices trading below longer-dated contracts, signaling expectations of near-term oversupply. Recovering crude flows through the Strait of Hormuz have reinforced that view, while Saudi Arabia’s exports have recovered to around 90% of their pre-war levels.

At the same time, lower crude prices have encouraged buying by China’s independent refiners, supported by more flexible pricing from Saudi Arabia and Kuwait. Even so, ANZ noted Iran continues to struggle to market its crude, with more than 58 million barrels remaining in floating storage and over 90% yet to secure a destination, according to Vortexa.