The US is considering easing sanctions to enable foreign buyers to purchase Iranian crude in floating storage, the latest in a series of steps President Donald Trump's administration has taken to respond to the disruption in Mideast Gulf supply sparked by the US-Israel war against Iran.
"In the coming days, we may unsanction the Iranian oil that's on the water," US treasury secretary Scott Bessent told Fox Business on Thursday. "It's about 140mn bl. So, depending on how you count it, that's 10 days to two weeks of supply that the Iranians had been pushing out that would have all gone to China."
Iranian crude shipments have slowed since the war started, averaging 1.14mn b/d over 1-16 March, according to data analytics firm Vortexa, which is around 1mn b/d lower than the full-month February average. But Iran stepped up shipments ahead of the start of the war on 28 February. More than 2mn b/d of Iranian crude arrived off China in February, almost double normal quantities.
At least 30mn bl of Iranian crude was in floating storage in international waters near Malaysia as of last week, according to Kpler. Iranian tankers typically await ship-to-ship transfers near Malaysia before it is delivered to China.
Another 40mn bl is in onshore storage in Shandong, China, according to a trader source. Some Iranian crude is also in floating storage off China's coast.
Targeted relief for Iranian crude would be difficult to craft. The US likely will demand that US dollar payments be made into a US-controlled account that Iran would not access directly — a condition that Tehran likely will reject.
The US administration already has come under criticism for granting sanctions relief to allow discharge of Russian crude in floating storage. A proposal to lift sanctions on Iranian crude likely will come under greater scrutiny.
But Bessent argued that sanctions relief for Iran would actually harm Iran's war objectives. "In essence, we will be using the Iranian barrels against the Iranians to keep the price down for the next 10 or 14 days as we continue this campaign."
Bessent said on 16 March that the US administration viewed Iran's ability to continue shipping oil tankers through the strait of Hormuz as helpful for addressing the disruption in Mideast Gulf oil supply. "The Iranian ships have been getting out already, and we will let that happen to supply the rest of the world," he said.
