Mr Obama has determined that there is enough oil in the world market to avoid negative consequences for US allies of a boycott of Iranian oil.
The move would allow the US to sanction foreign banks which are still involved in the oil trade with Iran.
Iran is facing international pressure to address concerns over its nuclear enrichment programme
Western countries suspect Iran of attempting to develop a nuclear weapon. Iran insists the programme is purely peaceful.
Mr Obama said in a statement that he would continue to monitor the global market closely to ensure it could handle a reduction of oil purchases from Iran.