Trafigura, Vitol, Mercuria and Abu Dhabi National Oil Co are among at least four companies seeking US licences. They want to buy or lease tankers blacklisted by Washington, Bloomberg reported on November 8. The talks cover about 50 of the roughly 1,600 ships currently under US sanctions1. All four companies declined to comment1.
Treasury officials are reviewing applications and may issue authorisations case by case rather than grant a blanket exemption, people cited by Bloomberg said. No decision is final and the time frame for approvals is unclear1. The report said some applications include supertankers able to carry 2 million barrels, but did not say how many of the 50 are very large crude carriers (VLCCs)1.
A small share of a long list
As of November 4, 1,568 ships faced US sanctions, including 462 crude oil tankers, according to Treasury data compiled by Bloomberg1. Most are older than the mainstream fleet, and many still switch off satellite tracking1.
Analysts have tried to work out how many could actually trade. BRS Shipbrokers counted 148 tankers in deepsea trades sanctioned only by the US Office of Foreign Assets Control (OFAC), equal to 2.5% of the global total by vessel count. Only 14 appeared to have been idle for more than three months2. The "overwhelming majority" were already working in likely sanctioned trades, mainly carrying Russian clean products, BRS said2.
Oil Brokerage reached a different total but a similar conclusion. It estimated that 294 sanctioned tankers were free of EU or UK penalties, but that 70% were more than 20 years old. That left 75 commercially available ships of all sizes, including 50 supertankers5.
Vortexa counted 7 VLCCs, 14 Suezmaxes and 58 Aframax or LR2 tankers as the most likely candidates. An edge case that included young Iran-linked ships would raise the pool to 48 VLCCs, 27 Suezmaxes and 65 Aframaxes3.
Owners have little reason to sell
US Energy Secretary Chris Wright set out the policy on October 19. He said investors would buy idled sanctioned tankers, refurbish them and use them to carry non-sanctioned oil. "We are converting dark tankers to legitimate tankers," he said. "There is no removing of sanctions."6
The economics work against a rapid sale. A supertanker shuttling through Hormuz can earn as much as $40 million a trip5. A 10-year-old vessel was worth about $190 million in early October, so owners can earn more by trading than by selling, Bloomberg reported5. A 15-year-old Suezmax could fetch $100 million secondhand, four times its 2021 value7.
Compliance is the other brake. "Sanctions relief does not equal immediately usable mainstream tanker capacity," said Rahul Kapoor, global head of shipping analytics and research for S&P Global Energy5. Gibson Shipbrokers said 70% of OFAC-listed tankers were at least 20 years old, including 120 of 163 VLCCs. It said few mainstream charterers could employ ships without International Group protection and indemnity cover and classification by a member of the International Association of Classification Societies2.
US approval would not settle the matter. Any licence applies only to US designations, while the EU and UK have their own restrictions on Russian and Iranian oil and on the shadow fleet1. The EU and UK also dominate maritime insurance cover, which limits unilateral US relief5.
BRS said the likely result would be more mainstream oil carried at the expense of Russian or Iranian oil, not looser tanker fundamentals2. Gibson said rates for Russian exports could rise if ships serving those trades moved to Middle East work2.
Freight is off the peak, not back to normal
The licence push follows a record run in tanker rates. Valero said freight from the US Gulf Coast to Asia was $30-35 a barrel in early November, against about $5 a year earlier4. The peak was nearly $40 a barrel in early October1.
At the end of October, the Baltic Exchange assessed the US Gulf to China route, TD22, at almost $61.5 million a voyage, or $477,013 a day round trip. TD3C, the Middle East Gulf to China benchmark, was at WS1262.5, equal to $1,345,710 a day8.
Rates have since eased. Vortexa said US Gulf and West African VLCC rates had fallen 27% and 32% from record peaks by late October3. Brent spot was $107.03 a barrel on November 3, down 21% from $135.51 a month earlier9. Freight remains far above pre-war levels: Sparta said the cost of moving WTI to Northwest Europe had risen from $1-2 a barrel to nearly $2010.
Where the ships would go first
Because most candidates are old, the Bloomberg report said they would suit short trips such as between the US and the Caribbean or Latin America. That would free newer tankers for long-haul voyages1. Gibson and BRS pointed to shuttle work around Hormuz, moving crude from Gulf terminals to lightering areas outside the strait2. Vortexa added Middle East Gulf to Asia routes3.
That sequencing suggests the first relief would show up on short-haul and shuttle routes. The long-haul benefit would arrive only as newer ships are displaced1, 2. That matters most for the US Gulf to Asia run, where the $30-35 a barrel freight bill sits4.
Licences would not change the security risk. Loading inside Hormuz costs $20-30 a barrel more than at the lightering zone, a spread that pays owners for the risk10. Attacks around Hormuz reached a record 29 vessel incidents in October, Vortexa said, citing the IMO3. Charterers have had to pay higher insurance fees because of the risk, Bloomberg reported1.
What to watch
OFAC has continued to designate ships and companies while the applications are reviewed. Its recent actions list Iran-related designations on November 6 and Cuba designations on November 511. That fits Bloomberg's account of case-by-case decisions rather than a blanket exemption1.
Three tests will show whether the policy adds usable capacity. The first is how many approved ships are VLCCs. The others are whether they obtain International Group insurance and classification, and whether the EU and UK clear them too2, 5.
Some buyers are not waiting. Indian Oil Corp's board has approved the purchase of a few crude and LPG carriers, with tenders issued months ago, its finance director said. Its time-chartered crude ships cost about $2-2.50 a barrel, against spot rates of as much as $8-1012.