The most immediate buffer to avoid oil supply shortages—crude in floating storage—is being depleted at a rapid rate as buyers scramble to get their hands on volumes sitting on tankers that are away from the Strait of Hormuz.
Oil in floating storage has fallen to about 78 million barrels this week, from 140 million barrels at the end of last year, according to data from intelligence firm Vortexa cited by Bloomberg.
Since the war in the Middle East began, the oil on water volumes have been drawing down at an estimated rate of about 1.8 million barrels per day (bpd), according to Vortexa data. This rate of depletion of oil in floating storage is one of the fastest in years and suggests that buyers in Asia are seeking physical supply that’s almost immediately available.
The temporary U.S. waiver on purchases of Russian crude on tankers is surely helping India to buy such crude, which Indian refiners had shunned for weeks before the war due to U.S. pressure to slash imports of Russian oil.
India is now winning the competition with China to attract Russian crude cargoes with vessels turning mid-voyage away from their previous Chinese destinations and heading for India, as the U.S. waiver and the Middle East supply shock drive Indian refiners back to buying Russia’s oil.
With the floating storage buffer fast depleting and oil prices still untenably high for the Trump Administration, Treasury Secretary Scott Bessent said on Thursday that the U.S. could ‘unsanction’ more than 100 million barrels of Iranian crude on tankers.
The U.S. has already moved to ‘unsanction’ an estimated 130 million barrels of Russian oil cargoes already on the water, and could do the same with about 140 million barrels of Iranian oil in floating storage, Bessent told FOX Business’ “Mornings With Maria” on Thursday.
The unsanctioning of Iranian oil – if it happens and if attracts non-Chinese buyers – would be difficult to transact because of other major sanctions against Iran in place, including in banking and insurance, analysts say.
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