Top oil traders ask Washington to free 50 sanctioned tankers

Summary

• At least four traders, including Trafigura and ADNOC, seek US licences for blacklisted tankers.
• Freight rates hit records after the US-Israeli war on Iran disrupted supply.
• Approval could ease a tanker shortage keeping crude near $100 a barrel.

The latest

At least four oil traders are negotiating with US officials for licences to buy or charter tankers currently on Washington's blacklist, people familiar with the talks told Bloomberg. The requests cover roughly 50 of about 1,600 sanctioned vessels and include very large crude carriers capable of moving 2 million barrels. Treasury officials are reviewing the applications case by case.

Details

• The companies: Bloomberg named Trafigura Group, Vitol Group, Mercuria Energy Group and Abu Dhabi National Oil Company as the parties in talks with US officials, citing people familiar with the matter who asked not to be identified because the discussions are private. Representatives of all four declined to comment.
• The mechanism: Treasury officials may issue licences on a case-by-case basis rather than granting a blanket exemption, according to the same people. No final decision has been taken, and the timeframe for any approvals remains unclear.
• The scale: As of 4 November, 1,568 vessels were under US sanctions, including 462 crude oil tankers, according to Treasury data compiled by Bloomberg. Most remain outside the view of enforcement authorities because they routinely switch off their satellite positioning signals.
• Freight costs: Shipping rates, a core component of the final oil price, climbed to record levels in recent weeks. Moving US crude to Asia on a supertanker reached nearly $40 a barrel in early October, against $5 a year earlier. Rates have since eased but stay near historic highs.
• Why rates spiked: Bloomberg attributed the surge to a shortage of tankers and the risk of sailing through the Strait of Hormuz. Ships have been forced onto longer routes to secure cargoes, while charterers pay higher insurance premiums, keeping crude close to $100 a barrel.
• The administration: Energy Secretary Chris Wright said last month the administration is working with investors buying idled sanctioned tankers and refitting them to carry non-sanctioned oil. The aim, he said, is turning "shadow tankers into legitimate tankers."
• The political cost: Pump prices have remained persistently high and were a major factor in the heavy losses the Republican Party sustained in this week's midterm elections, Bloomberg reported. The administration has already released millions of barrels from emergency reserves and suspended some fuel regulations.
• The limits: Any Treasury or OFAC licence would apply only to US-sanctioned ships. The European Union and the United Kingdom have imposed their own restrictions on Russian and Iranian oil and targeted the so-called shadow fleet.
• The fleet's condition: Most sanctioned vessels are older than mainstream tankers, raising maintenance and safety concerns. One person said they could still run short routes, such as the United States to the Caribbean or Latin America, freeing newer ships for long-haul voyages.
• The trade-off: Bloomberg said the challenge for the Trump administration is expanding shipping capacity and lowering prices while preventing illicit actors from gaining large cash flows. It remains unclear how much the measure would ultimately reduce prices.

Background

Oil prices jumped after the United States and Israel launched their war on Iran, causing what Bloomberg described as the largest supply disruption in history. Iranian crude exports have since fallen close to zero, pushing buyers onto longer routes and tightening the pool of available tankers.

Between the lines

One person said reactivating genuinely idled vessels, such as the Skipper anchored off the Texas coast since December, would matter more than relabelling ships already working in the shadow fleet. That distinction sets the plan's practical ceiling: with 462 sanctioned crude tankers listed and most hiding their positions, Washington has limited visibility into which of the 50 vessels are truly parked.

What's next

Watch for the first Treasury or OFAC licence decisions, which officials may issue vessel by vessel, and for whether supertanker freight rates on the US-Asia route retreat further from October's near $40 a barrel peak.

Source: Bloomberg