Why "temporary exemption for Iranian offshore oil"? The U.S. is "forced by circumstances": global crude oil reserves are rapidly diminishing.

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The global oil market's offshore buffer inventory is being depleted at the fastest pace in recent years, forcing the U.S. government to take successive actions to suppress oil prices.

According to a Wallstreetcn article, on March 20 local time, U.S. Treasury Secretary Bensett announced that the United States has approved a 30-day authorization, allowing for the delivery and sale of Iranian crude oil and petroleum products that have already been loaded onto ships. Bensett 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 any new purchases or production activities."

The direct background of this exemption is the sharp decline in global offshore floating oil inventories. According to Bloomberg, citing data intelligence agency Vortexa, since the outbreak of hostilities in the Middle East, the floating inventory of offshore crude oil and condensate has been decreasing at a rate of 1.8 million barrels per day, and has now dropped to about 78 million barrels—about one-third of which comes from Iran.

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

This decision, together with the previously disclosed plan to release about 45 million barrels from the Strategic Petroleum Reserve (SPR), constitutes a combination of measures by the US to deal with rising oil prices, and is also part of the International Energy Agency’s (IEA) global coordinated emergency stock release action.

Given the continuing geopolitical risks and the still-closed Strait of Hormuz, the market generally believes that whether it is a stock release or an exemption for Iranian oil, these moves are closer to "short-term pain relief" rather than a reversal of the trend — the medium-term trajectory of oil prices will still mainly depend on how the Middle East situation evolves.

Offshore buffer stock shrinks rapidly, supply pressure surges

According to Bloomberg, global offshore floating oil inventories once surged to a peak of over 140 million barrels at the end of last year, driven by multiple factors including US pressure on India to reduce purchases of Russian oil and accelerated Iranian exports.

However, since then, this inventory has almost been halved. According to Vortexa data, the current offshore floating inventory is about 78 million barrels and is still declining at a rate of 1.8 million barrels per day, one of the fastest consumption rates in recent years.

Among the current offshore floating inventory of about 78 million barrels, about one-third comes from Iran, making Iranian offshore oil the most operationally feasible supplemental source in the short term.

Bensett estimated when announcing the exemption that there are currently about 140 million barrels of Iranian oil at sea. According to Bloomberg analysis, this number may refer to all oil that is in transit, including cargo already bought by customers, and not all of it may be immediately available for delivery.

Goldman Sachs estimates that there are about 131 million barrels of Russian oil at sea and about 105 million barrels of Iranian crude oil at sea, together only enough to offset about two weeks of disruption from a Strait of Hormuz closure.

Previously, the US had already issued exemptions for Russian offshore oil. This time, the exemption is extended to Iran, continuing Washington’s policy of broadening access channels to seaborne oil barrels to stabilize prices.

Practical obstacles to implementing the exemption

Despite the clear policy intent, turning Iran's floating inventory into immediately available supply is not simple. According to Bloomberg, entering this chain of transactions requires finding trading partners and arranging payment channels, while other sanctions restrictions still apply.

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

"Mainstream importers will still be constrained by compliance, financing, and logistics, especially when the exemption is seen as temporary or uncertain."

This means that even with the exemption order issued, there is still considerable uncertainty regarding the actual volume of Iranian oil that can quickly enter the market.

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