At first glance, the U.S. Office of Foreign Assets Control (OFAC)’s 30-day waiver allowing imports of Iranian oil already on water appears to be a headline solution to the crude market’s supply panic. Combined with Russian barrels, the “additional” volumes potentially made accessible to mainstream buyers partially offset the losses seen in the first three weeks of the conflict.
But how practical is it in reality?
To answer that, it’s essential to understand the current state of Iranian supply. As highlighted in our earlier insights, Iran has been accelerating exports since late last year in anticipation of further disruptions. Exports surged to a record 2.2 mbd in February, outpacing imports even as Chinese discharge activity increased. This imbalance has driven a continued build in floating volumes — a major contributor to rising crude-on-water levels.
As of 20 March — the cut-off load date covered by the waiver — Iranian crude and condensate on water stood at close to 170 mb, with at least 150 mb sailing east of the Strait of Hormuz. The key question is therefore not how much crude is floating, but who controls it. Put differently: if a buyer wants to capitalise on the waiver, who are they actually transacting with?
Who controls the barrels?
For context, Iran established the Energy and Oil Management and Strategy Organization (EOMSO) late last year to streamline energy-related operations. While its exact role in exports remains unclear, its establishment has coincided with a reduction in NIOC’s upstream footprint and a significant expansion of the Islamic Revolutionary Guard Corps’ (IRGC) role in crude exports. Notably, much of the incremental export growth in recent months appears to have been driven by the IRGC.
Market discussions suggest that roughly 100 mb — about 60% of crude on water — remains under Iranian control, primarily via IRGC-linked entities. The remaining volumes have already been sold to intermediaries or effectively secured by Chinese buyers. This means that any party seeking access to these floating barrels would, in practice, be negotiating with IRGC-affiliated suppliers.
Sanctions still matter
According to experts with direct knowledge of the framework, while the waiver fully exempts U.S. entities, secondary sanctions on dealings with OFAC-designated parties remain in force for non-U.S. participants. As a result, buyers would still need to transact through intermediaries and rely on non-USD payment channels to manage sanctions risk.
Given these constraints, the existing buyer base — particularly Chinese teapots — is likely to remain dominant for now.
In effect, the waiver’s impact on reducing market anxiety and pressuring the forward curve currently far exceeds its actual utility in filling mainstream supply gaps.
That said, Asian refiners — especially Indian refiners and Chinese oil majors — could, in theory, displace teapot demand if they succeed in resolving payment and compliance hurdles. Should this occur, increased competition for Iranian barrels would push delivered prices much higher, mirroring the pattern observed in the Russian market as its buyer pool expanded.
Source: Vortexa
