(March 13): The US issued a second authorisation letting countries buy more Russian oil that’s stuck on tankers due to sanctions, part of the White House’s push to prevent prices from surging.
The temporary move, which widens a waiver given to India last week, only applies to oil already in transit and as such won’t provide significant financial support for the Russian government, Treasury Secretary Scott Bessent, in a social media post.
Brent oil has soared about 40% since the Iran war began, driving up fuel prices at the pump globally, including gasoline in the US. The conflict has led to the effective closure of the Strait of Hormuz, the world’s most-important energy-shipping channel, choking the flow of a fifth of the world’s oil.
It’s unclear how much extra oil the step will free up in practice and it represents a fraction of what’s been lost because of the Hormuz turmoil this month. India had a week from the first waiver to snap up on-water cargoes and quickly took 30 million barrels. That means there are fewer available now.
“Of course any supply helps, but this is a smaller help than it looks,” said Robert Rennie, head of commodity research at Westpac Banking Corp. “We are only really talking about replacing maybe four or five days of lost Gulf exports. Sure, it helps, but it is no panacea.”
Out of 125 million to 150 million barrels of Russian crude on the water, about a third is off China and likely to end up in storage, with 30 million to 40 million barrels near India and likely to be consumed there, Rennie said. The rest is in the Mediterranean and the Atlantic, he said.
See also: Japan to sell oil from national reserves at pre-Iran war prices
Historic disruption
The International Energy Agency (IEA) estimated on Thursday that Middle East producers will cut their collective output by close to 250 million barrels this month, while shipments through Hormuz will decline by over 600 million barrels of crude and fuels. Up to about a third that theoretically might be diverted via pipelines that bypass the waterway.
The US government has taken several other steps to tame the impact of the disruption, which the IEA said is the biggest supply disruption in the history of the oil market.
See also: Trump and Iran strike defiant tone as oil markets see little relief
It’s releasing of 172 million barrels from its emergency oil reserve and has floated other ideas, ranging from intervention in the futures markets, to waiving a century-old law that requires US ships be used to transport goods between American ports.
The latest waiver applies to oil loaded before March 12 and runs for a month. The prior one was for pre-March 5 cargoes, and also ran for a month.
About 30 vessels in Asian waters are carrying Russian crude and products that are potentially available for purchase, ship-tracking data compiled by Bloomberg show. The vessels are signalling “for orders” — meaning they have no clear destination yet — or are headed towards Singapore or Malaysia, locations where tankers tend to linger while cargoes are sold.
Bessent has previously suggested the US could “unsanction” additional Russian oil to ease price pressure.
“If oil prices spike again, perhaps because Iran steps up its attacks on oil tankers in the Strait of Hormuz, pressure to lift Russia sanctions will build further,” Robin Brooks, a senior fellow at the Brookings Institution, said in a social media post.
Bessent said earlier on Thursday that any benefit for Russia from US actions would be “unfortunate” and short-term.
“We hope that it will be a micro period that they will benefit,” he said on the Master Investor Podcast with Wilfred Frost.
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