US Grants Temporary Waiver on Iran Oil Sanctions for Stranded Cargo at Sea; Treasury Secretary Says 140 Million Barrels Can Be Supplied Quickly; US Releases First Batch of 45 Million Barrels from Strategic Petroleum Reserve

Source: Wall Street Insights

As Middle East conflicts continue to drive up energy prices, the Trump administration has begun taking action to curb the surge in oil prices. The latest measures include releasing some of the Strategic Petroleum Reserve (SPR) and temporarily waiving sanctions on Iranian oil.

According to CCTV News, the U.S. Department of the Treasury announced that on Friday, March 20, local time, it approved a 30-day authorization allowing the delivery and sale of ships carrying oil and petroleum products originating from Iran. The new license permits the sale of Iranian crude oil and petroleum products already loaded onto ships as of March 20.

Treasury Secretary Janet Yellen stated that the Department of the Treasury is issuing a “narrow, targeted, short-term authorization to allow the sale of currently stranded Iranian oil.”

Yellen said, “By temporarily releasing this existing supply for global use, the U.S. will quickly provide approximately 140 million barrels of oil to the global market.” She also added, “This temporary, short-term authorization is strictly limited to oil already in transit and does not permit new purchases or production activities.”

Before Yellen’s announcement, after the U.S. stock market closed on Friday, media reports citing sources indicated that the U.S. government plans to release about 45 million barrels of oil from the SPR in the first phase, aiming to curb rising fuel prices.

This action is part of the larger emergency release plan of 172 million barrels of oil from the SPR and is also a component of the global oil reserve release announced last Friday by the International Energy Agency (IEA). Against the backdrop of supply disruptions and geopolitical risks, markets are closely assessing whether large-scale use of strategic reserves is merely a “short-term painkiller” or a key factor that could alter the trend of oil prices.

Based on the information disclosed this Friday, the initial release by the U.S. accounts for approximately 26% of its planned total release.

Last Friday, the IEA announced that its 32 member countries had agreed to release a total of 400 million barrels of strategic oil reserves. This is the largest collective release in IEA history. After the Russia-Ukraine conflict in 2022, IEA members released about 183 million barrels in two separate actions, and this time, the scale has doubled.

Later on Friday, the U.S. Department of Energy confirmed that, as part of the IEA-coordinated global effort, the U.S. plans to release 172 million barrels of SPR oil to respond to rising oil prices triggered by U.S. and Israeli airstrikes on Iran. Based on the current release pace, the process is expected to last approximately 120 days.

Wall Street Insights subsequently pointed out that the U.S. release of reserves has been significantly delayed. After the president issues the order, the Energy Department needs about 13 days to conduct bidding, award contracts, and begin delivery. Then, crude oil must be transported via pipelines or tankers to refineries and end-users. Even with immediate action, the oil stored in reserves would only enter the market by late March at the earliest.

The release of 172 million barrels from the SPR is one of the largest policy interventions by the U.S. government in recent years. Notably, this release is not a simple “sale,” but more akin to an “exchange” mechanism: companies receive the oil now but are required to return it in the future, possibly with interest. This means the policy goal is not only short-term price suppression but also medium- to long-term inventory management.

From historical experience and market structure, the impact of releasing oil reserves on prices has clear “timing” and “structural” characteristics:

• Short-term: alleviating spot shortages and lowering near-month prices

  Media reports indicate that traders have begun selling near-month crude futures and buying longer-dated contracts, reflecting that the release will increase short-term supply but still face replenishment pressures in the future.

  This suggests: spot prices may decline, and futures curves could become more “backwardated” (futures prices higher than spot).

• Medium-term: price support remains, geopolitical risks dominate

  Similar to the Russia-Ukraine conflict in 2022, oil reserve releases can only offset part of the “supply gap” and are unlikely to reverse the overall trend.

  The current situation is more complex: larger-scale disruptions in Middle Eastern supply; ongoing shipping risks in the Strait of Hormuz; and energy infrastructure becoming targets for attacks.

  Therefore, even with a release of 172 million barrels, the market may still experience high volatility.

• Long-term: inventory pressures and policy space are limited

  Strategic petroleum reserves are essentially a “safety cushion.” The U.S. SPR has a total capacity of about 700 million barrels, but recent large-scale withdrawals have brought inventories to historically low levels.

  Wall Street Insights noted this week that after releasing 172 million barrels, the U.S. SPR will be reduced to 244 million barrels, well below the statutory red line of 252 million barrels. Additionally, salt cavern storage structures require maintaining a minimum safety stock of 150-160 million barrels. Even if the red line is broken, there is less than 90 million barrels of additional release capacity.

In summary, continuous releases will weaken future crisis response capabilities, as the marginal effectiveness of policy tools diminishes, and subsequent replenishment at high prices will increase fiscal costs.