This morning, there was news about bombings at some Houthi strongholds where they store weapons. Additionally, the Office of Foreign Assets Control has sanctioned 16 companies and 23 tankers in their most aggressive action against Iran. Yet, it seems unlikely that oil prices will break out of the range they’ve been trading in over the past six months, because of the bearish demand outlook.
What are shipping rates indicating about demand?
At this time of year, tanker rates typically experience a Q4 seasonal increase. We’ve seen for Suezmax tankers, with rates up from $22, 000/day at the beginning of the month to $42, 000/day. Aframax tankers, which are slightly smaller, have also increased from around the same level to $38, 000/day. However, VLCCs, which transport 2 million b/d, haven’t seen much change. This is likely because they primarily serve the Middle East Gulf to Asia market, whereas Suezmax and Aframax vessels operate more in the Atlantic Basin, which has been more affected by disruptions in the Red Sea. The lack of a seasonal uplift for VLCCs may reflect weaker demand than usual for this time of year, although there’s still time for that to change.
Do you foresee any change in volumes shipped on ‘Dark Fleet’ vessels?
Despite sanctions and blacklisting, these tankers are still trading, with China as the primary destination, particularly for Iran’s 1.5 million b/d of crude. About 70% of sanctioned Russian, Venezuelan and Iranian tankers continue trading, with China being their main market, as well as countries like Turkey and India.
Could the US election result impact Iranian crude supplies?
Over the past five years, despite sanctions, trade flows have remained uninterrupted. I believe Iranian crude will continue to make its way to China. What we are seeing is that buyers are purchasing crude on CIF terms, instead of FOB. So, they’re not taking on any risk related to chartering the vessels, mitigating their exposure to sanctions.