Why the "Temporary Waiver on Iranian Oil at Sea"? U.S. "Forced by Circumstances": Global Crude Oil Buffer Depleting Rapidly

The offshore floating oil inventories in the global oil market are being depleted at the fastest rate in recent years, forcing the U.S. government to take successive actions to suppress oil prices.

According to Wall Street Journal, U.S. Treasury Secretary Janet Yellen announced on March 20 that the U.S. has approved a 30-day authorization allowing the delivery and sale of Iranian crude oil and petroleum products already loaded onto ships. Yellen stated that this move will “quickly supply about 140 million barrels of oil to the global market,” but emphasized that the authorization is “strictly limited to oil already in transit and does not permit new purchases or production activities.”

The immediate background for this exemption is the sharp decline in global offshore floating storage. Bloomberg, citing data from intelligence firm Vortexa, reports that since the outbreak of Middle East conflicts, offshore crude and condensate floating storage has decreased by 1.8 million barrels per day, now down to about 78 million barrels—approximately one-third of which is from Iran.

Analysts point out that the rapid reduction of this buffer layer is the core reason Washington had to greenlight Iran’s offshore oil exports.

This decision, along with the previously disclosed plan to release about 45 million barrels from strategic reserves (SPR), forms part of the U.S. response to rising oil prices, and is also a component of the global coordinated release by the International Energy Agency (IEA).

In the context of ongoing geopolitical risks and the Strait of Hormuz remaining closed, the market generally views both the release of reserves and the exemption for Iranian oil as more of a “short-term pain relief” rather than a trend reversal— the medium-term trajectory of oil prices will still largely depend on developments in the Middle East.

Offshore Buffer Stocks Shrinking Rapidly, Supply Pressure Mounts

Bloomberg reports that at the end of last year, global offshore floating storage peaked at over 140 million barrels, driven by multiple factors including U.S. pressure on India to reduce Russian oil imports and accelerated Iranian exports.

Since then, this storage has nearly halved. According to Vortexa data, current offshore floating storage is about 78 million barrels, continuing to decline at 1.8 million barrels per day, one of the fastest consumption rates in recent years.

Of the approximately 78 million barrels of offshore floating storage, about one-third is from Iran, making Iranian offshore oil a short-term, highly operable supplementary source.

Yellen estimated that there are about 140 million barrels of Iranian offshore oil in transit. Bloomberg analysis suggests this figure may include all in-transit cargoes, including those already sold, not necessarily immediately deliverable.

Goldman Sachs estimates that offshore Russian oil is about 131 million barrels, and Iranian crude oil about 105 million barrels, together enough to offset only about two weeks of losses from the Strait of Hormuz disruption.

Previously, the U.S. granted exemptions for Russian offshore oil, and this time extending the exemption to Iran continues Washington’s policy of expanding offshore oil channels to stabilize prices.

Practical Obstacles to Implementation of the Exemption

Despite clear policy intentions, converting Iranian floating storage into immediately available supply is not straightforward. Bloomberg reports that facilitating such transactions requires finding trading partners and arranging payment channels, while sanctions restrictions still exist.

Emma Li, Chief Analyst at Vortexa China Market, said:

“Mainstream importers will still face constraints related to compliance, financing, and logistics, especially when exemptions are viewed as temporary or uncertain.”

This means that even after the exemption is granted, the actual volume of Iranian oil that can quickly enter the market remains highly uncertain.

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