Reversal! Report: Trump administration shelves plan for the Treasury Department to "manage" oil futures

The escalation of the Iran situation has driven Brent crude oil to its largest weekly gain since 2022, soaring 17% in a single week, putting political pressure on the Trump administration ahead of the midterm elections. To curb the rise in oil prices and fulfill campaign promises to lower living costs, the White House is urgently evaluating various intervention tools, but the most controversial plan—direct involvement of the Treasury Department in crude oil futures trading—has been temporarily shelved.

On March 6, according to Bloomberg, citing sources familiar with the matter, the government had discussed authorizing the Treasury Department to buy and sell futures, but analysis suggests that the agency’s actual market influence would be limited. Under current geopolitical tensions, intraday trading volume in oil futures has surged sharply, and intervention by a single participant would be significantly diluted.

Another potential option—releasing strategic petroleum reserves (SPR)—also faces obstacles. Large-scale withdrawals during Biden’s administration have reduced inventories to about 60% of capacity. Frequent use has caused equipment wear and delayed maintenance, increasing operational complexity for further releases.

On Friday, international oil prices edged lower. Trump hinted at “upcoming actions” to stabilize prices, and the Treasury Department announced a temporary exemption for Indian refiners importing Russian crude oil. According to Bloomberg, the White House is still weighing multiple alternatives, including providing insurance guarantees for tankers passing through the Strait of Hormuz, organizing naval escorts, and temporarily waiving fuel blending requirements.

Ideas Stalled at Concept Stage

The idea of direct intervention by the Treasury Department in crude oil futures has attracted significant attention, partly due to current Treasury Secretary Janet Yellen’s strong financial background. Former Chief Investment Officer at Soros Fund Management and founder of macro hedge fund Key Square Group, Yellen has decades of experience in currency, bonds, and commodities trading.

According to Bloomberg, citing sources, the plan has now been explicitly ruled out. Phil Flynn, senior analyst at Price Futures Group, described it as “a highly creative move outside the usual framework,” possibly involving “selling near-term futures and buying longer-dated contracts” to lower front-month prices and calm panic.

Flynn also noted that the Treasury’s traditional functions focus on fiscal policy, debt management, and occasional currency interventions, never involving large commodities like oil. Yellen’s trader instincts may have inspired this unconventional idea, but its fundamental misalignment with the Treasury’s statutory responsibilities ultimately caused it to be shelved.

More updates to come

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