Sale of U.S. Oil Reserves Ahead of Expiration of Sanctions Waivers for Iran

On Thursday, March 9, the U.S. Department of Energy announced on its official website that it will sell six million barrels of the country's strategic oil reserves. These shipments are set to be sold next month, with buyers expected to receive them in the first half of May. The delivery time for these shipments, equivalent to 200,000 barrels per day, coincides with the expiration of U.S. sanctions waivers for Iran's oil customers. In November 2018, the U.S. granted waivers to eight countries—China, India, South Korea, Japan, Taiwan, Turkey, Italy, and Greece—for six months to continue limited purchases of oil from Iran. Before the sanctions, Iran sold 2.5 million barrels of oil and gas condensates daily. U.S. officials state that the goal of the first round of waivers was to reduce Iran's exports to one million barrels per day. It remains unclear whether the U.S. plans to extend the waivers, but the stated goal is a gradual yet rapid reduction of Iran's oil exports to zero. In anticipation of imposing oil sanctions against Iran in November, the U.S. also sold 11 million barrels from its strategic oil reserves. In 2015, the U.S. decided to sell $2 billion worth of its strategic oil reserves to modernize its storage facilities between 2017 and 2020. For this year, a sale of $300 million worth of oil reserves is forecasted. According to the latest statistics from the U.S. Energy Information Administration, the country's strategic oil reserves currently stand at approximately 649 million barrels. Reuters and the specialized publication Platts have reported on the sale of U.S. strategic oil reserves in May, mentioning the potential extension of U.S. oil waivers for Iran's oil customers. Platts notes that this week, three high-ranking U.S. officials met with the King and Crown Prince of Saudi Arabia during a visit. Brian Hook, the U.S. Special Representative for Iran, was also among the members of this delegation. According to OPEC statistics, Saudi oil production peaked above 11 million barrels in November 2018, just before the U.S. oil sanctions against Iran, showing an increase of over one million barrels compared to 2017. However, with the announcement of waivers allowing Iran to continue limited oil sales to eight countries, Saudi Arabia significantly reduced its production, bringing it down to 10 million and 213 thousand barrels in January. The U.S. waivers for eight countries were apparently not expected by Saudi Arabia and major oil-producing countries like its Arab allies and Russia. Oil prices plummeted sharply after November, and OPEC, along with some non-member producers led by Russia, agreed to cut their production by 1.2 million barrels in the first half of this year. In its budget bill for the next year, 1398, Iran has forecasted daily oil exports of one million and 540 thousand barrels, which is effectively 30 percent more than the current exports of the country.