Unprecedented! United States to Personally Step Into Crude Oil Futures Market; Treasury Secretary Bessent to Resume Old Trade?

The U.S. Treasury Department is assessing direct action in the crude oil futures market to curb the oil price surge triggered by the Iran conflict. This would be a rare—and potentially “unprecedented”—financial-market intervention by Washington, aimed at influencing price expectations rather than adjusting physical crude oil supply.

According to Reuters, a senior White House official revealed that the U.S. Treasury Department could announce a series of measures to address rising energy prices as early as Thursday, March 5.This may include direct intervention in the oil futures market.As the details of the plan remain unclear, the official refused to disclose specifics in advance, stating that they did not wish to preempt the announcement from the Ministry of Finance.

Market volatility has been the direct trigger for this intervention. Since the conflict with Iran began last Saturday, the US crude oil futures price has surged nearly 21% due to the disruption of Middle Eastern oil supply, directly increasing fuel costs and raising concerns about a rebound in inflation.

Despite the energy market's heightened attention to the potential intervention by the Treasury, President Donald Trump remained calm. He clearly stated that the current priority is military operations, not intervening in short-term oil prices, and expected prices to quickly after the conflict.

Baysent "returns to his old trade"

The preemptive intervention in the futures market is closely related to the deep financial background of U.S. Treasury Secretary Bernanke.

Bessent previously served as Chief Investment Officer at Soros Fund Management and later founded the macro hedge fund Key Square Group, with decades of experience in trading currencies, bonds, and commodities.

From an operational perspective, Phil Flynn, Senior Analyst at Price Futures Group, described this move as “a highly creative out-of-the-box move.”and specifically suggested the strategy of "selling the near end of the futures curve and buying the far end" to depress near-month contract prices and calm market panic sentiment.Flynn also pointed out that the traditional functions of the Treasury have been focused on fiscal policy, debt management, and occasional currency intervention, and have never ventured into the realm of commodities such as oil.

Precedent Reference: ESF and the Experience of Quantitative Easing

Although intervening in the oil futures market is unprecedented,However, the U.S. government's use of financial instruments to stabilize markets is not unprecedented.

During the 2008 financial crisis, the Federal Reserve implemented quantitative easing by purchasing mortgage-backed securities and Treasury bonds on a large scale. Meanwhile, the Treasury Department’s Exchange Stabilization Fund (ESF) intervened last October by purchasing pesos and providing Argentina with a $20 billion currency swap line to support its currency exchange rate. Established during the Great Depression, the ESF held total assets of $220.85 billion as of January 31 of this year and has historically supported Federal Reserve lending facilities during the 2008–2009 global financial crisis, the COVID-19 pandemic, and the 2023 U.S. banking crisis.

Moreover, Mexico has long implemented a petroleum revenue protection program known as the "Hacienda hedge," which was once the world's largest financial oil transaction, but its hedging target is physical oil inventories, fundamentally differing from those using purely financial instruments.

Analysts: It may have a deterrent effect in the short term, but it is difficult to solve the supply gap.

Many market analysts express skepticism about the actual effectiveness of the Ministry of Finance’s intervention.The role of financial instruments is limited by whether the physical supply can be restored.

John Paisie, president of Stratas Advisors, said that this move might curb speculation by making traders realize that the U.S. government is on the other side, thus easing the rise in oil prices. "But it won't solve the problem of physical supply disruptions — the closure of the Strait of Hormuz is significant, and there is no spare capacity outside the Gulf region. Ultimately, if a large amount of oil supply remains blocked, financial maneuvers won't work, and traders will still bet on rising oil prices, because prices should be higher anyway."

IG market analyst Tony Sycamore, however, believes that even if the Treasury Department directly intervenes in futures contracts, “it may create a brief pause or scare off some speculative long positions, but I doubt its effect would last more than a day or two. The oil market is vast and global, driven fundamentally by real supply and demand—especially given the already disrupted Strait shipping and the tangible threat posed by Iranian drones; thus, verbal pressure or symbolic actions by the Treasury Department are unlikely to alter this reality.”

Marex analyst Ed Meir directly pointed to potential risks: “If they intend to suppress prices by selling futures, it is a massive bet—and an unprecedented intervention in the crude oil market. The most immediate question is: if prices continue rising and their short positions incur losses, what will they do? Will they draw on the Strategic Petroleum Reserve for delivery, or continue posting additional margin to hold on?”

Societe Generale's Head of Quantitative Commodities Research, Ben Hoff, described this potential move as "unprecedented" and emphasized that the influence of financial instruments in energy markets is ultimately limited, adding, "The devil is in the details, and we still need to see the specifics of the U.S. government's plan."

Market sentiment intensifies: Hedging transactions hit a record high.

While Washington was considering intervention measures, trading activity in the crude oil derivatives market has reached a fever pitch. With WTI crude oil futures poised for their largest weekly gain since March 2022, producers and consumers are rushing to enter the market.

According to Energy Aspects data, U.S. producers’ hedging transaction volume reached a record high this week—the highest since Energy Aspects began compiling such data in 2023. Traders noted that for major dealers serving both producers and consumers, this week has become the busiest they have ever experienced.

Producers are seizing the rare pricing window to lock in future sales profits through forward contracts.This sharp sell-off of forward contracts caused the WTI futures curve to steepen into significant backwardation (where near-month contracts trade far above deferred months), with the June-to-December spread surging from $1.48 to $8.21 in just two weeks. Meanwhile, collar option strategies have also become more attractive, as producers buy put options to protect their price floor while simultaneously selling call options to reduce hedging costs.

Faced with this situation, crude oil consumers are equally vigilant. Rob McLeod, Head of Energy Price Risk Solutions at Hartree Partners, stated on LinkedIn that this week has been a sobering lesson for airlines that previously deemed hedging “too expensive” or “too risky”: “Relying on luck is not a strategy.”