US tanker owners cash in on Iran sanctions and trade tensions
Dow Jones reported that US sanctions on Iran and the trade battle with China have become a boon for owners of tankers, with daily freight rates at their highest in two years as ships shift their routes to load up crude from other oil-producing countries. Crude exports from Iran, the world’s fifth-biggest oil producer, have fallen about 50% since May when the US pulled out of a landmark deal curbing Iran’s nuclear program. A new set of sanctions against Tehran took effect at the start of this month. Oil traders and tanker brokers said Saudi Arabia has moved to fill the void of more than one million barrels a day. Meanwhile, China has stopped importing US crude as it pushes back against American tariffs on Chinese-made goods. Beijing is now sourcing crude oil from as far as West Africa.
Before the trade dispute, China accounted for about a quarter of US crude exports. Those are now moving to other markets like South Korea, the Netherlands and the U.K., according to Peter Sand, chief shipping analyst at Bimco, an international association representing shipowners. This has significantly changed the routes and sailing times of very large crude carriers, or VLCCs, the supertankers that move oil across the oceans for the world’s energy giants. As buyers prepare for winter and the demand for heating oil peaks, freight rates more than quadrupled from September to October, to USD 45,000 a day.
The chief executive of an Asia-based company with more than two dozen tankers, who asked not to be named, “We are making some good money for the first time since the beginning of 2017. Uncertainty is historically good for freight rates, and this time it’s happening during the high season. The question is how long it will last.”
A U.S. decision to grant waivers to eight countries that allow them to continue buying Iranian crude is softening the impact of the sanctions and providing needed revenue to state-run National Iranian Tanker Co., the country’s flagship shipping company.
Singapore and London brokers say around 65% of NITC tankers are moving oil cargoes to the countries with U.S. waivers, including China, India, Japan, South Korea, Italy, Turkey and Greece. These markets traditionally buy around 70% of Iran’s oil exports. The White House wants the flow to wind down, but tanker brokers say that is unlikely to happen soon, as a halt could push oil prices to around $100 a barrel, potentially undermining U.S. economic growth.
The brokers said more NITC ships could be used as other tanker operators stay clear of Iran, fearing punitive action by Washington. NITC owns 38 VLCCs out of a global fleet of 733, and several smaller tankers. The company didn’t respond to requests for comment.
Mr Sand said that “The big picture is that Iran crude exports won’t grind to a halt, and about a billion barrels a day will continue to move out. That’s more or less what they exported during the previous sanctions from 2012 to 2016 and it will bottom out around there.”
VLCCs need daily charter rates of around $25,000 to break even, but rates were hovering well below that level since April 2017 until the October surge.
Mr Patrick Rodgers, chief executive of Belgium-based Euronav, one of the world’s largest tanker operators, told The Wall Street Journal in October that he expects most of the 10 biggest tanker owners to be in the red this year.
Although, crude hasn’t been taxed in the U.S.-China trade showdown, China has stopped buying it from the U.S. over the past two months. Brokers said they see increased China-destined cargoes from Nigeria, Angola and Libya, and that freight rates have increased because of the longer sailings.
Source : Dow Jones