US. Sanctions against Iran and the trade dispute with China have become a blessing for tankers, with daily freight rates…
US. Sanctions against Iran and the trade dispute with China have become a blessing for tankers, with daily freight rates of no more than two years, as ships shift their routes to charge crude oil from other oil-producing countries.
Exports from Iran, the world’s fifth largest oil producer, have fallen about 50% since May when the United States pulled out of a milestone trade to fight Iran’s nuclear programs. A new set of sanctions against Tehran came into force at the beginning of this month.
Oil dealers and tanker brokers said Saudi Arabia had moved to fill the void of more than one billion barrels a day. Meanwhile, China has stopped importing US commodities, as it pushes back against US tariffs on Chinese goods. Beijing now buys crude oil from as far as West Africa.
Before the trade event, China accounted for about a quarter of US raw exports. They now move to other markets such as South Korea, the Netherlands and the UK, according to Peter Sand, chief executive analyst at Bimco, an international association representing shipowners.
This has significantly changed the roads and sailing times with very large crude carriers or VLCCs, the supertanks that move oil across the ocean for the world’s energy hunters. As buyers prepare for the winter and demand for oil heater heating, shipping takes more than quadrupled from September to October to $ 45,000 a day.
“We make some good money for the first time since the beginning of 201
7″ CEO of an Asia-based company with more than two dozen tankers, who asked not to be named. “Uncertainty is historically good for shipping prices, and this time it takes place in high season. The question is how long it will be.”
An American decision to grant exemptions to eight countries that allow them to continue to buy Iranian raw materials mitigates the impact of sanctions and provides necessary revenues to state-run National Iranian Tanks Co.
Singapore and London brokers say that about 65% of NITC tanks move oil loads to countries with US exemptions, including China, India, Japan, South Korea, Italy, Turkey and Greece.  These markets traditionally buy about 70% of Iran’s oil exports. The White House wants the flow to fall, but tanker brokers say it is unlikely to happen soon as the content could push the oil price to around $ 100 a barrel, potentially undermining US economic growth.
Brokers said that more NITC vessels could be used as other tankers operators keep clearing Iran, fearing Washington penalties. NITC owns 38 VLCCs out of a global fleet of 733, and several smaller tankers. The company did not respond to the request for comments.
“The big picture is that Iran’s raw exports will not slip, and about one billion barrels per day will continue to move out,” says Sand. “It’s more or less what they exported under the previous sanctions from 2012 to 2016 and it will bottom around there.”
VLCCs need daily charter prices of approximately $ 25,000 to break even, but prices dropped well below the level since April 2017 until the October rise.
Patrick Rodgers, head of the Belgian-based Euronav, one of the world’s largest tanker operators, told the Wall Street Journal in October that he expects most of the ten biggest tanker owners to be in red this year.
Although crude hasn has been taxed in the US-China trade event, China has stopped buying it from the US in the last two months. Brokers said they saw increased China-based loads from Nigeria, Angola and Libya, and that shipping rates have increased due to longer sailings.
But industry leaders say that price increases may be short-lived as buyers and sellers adapt to new trade patterns.
“Oktoberpiken [in freight rates] is a dead cat,” Sand said. “Tank capability is significant and demand for oil will be damped due to still inflated reserves. The pressure on tax rates will be resumed in 2019.”
A Greek tanker owner who has shipped Iranian raw material in the past 25 years expects a downward pressure on freight rates to start already in December.
“When the new routes broke in and the season’s demand facilitates, we will probably be back to unfortunate statutes,” he said. “I do not see a sustainable recovery in freight rates by 2020.”
Write to Costas Paris at [email protected]