The non-sanctioned crude tanker market could see a surge in demand if the pending peace deal between the US and Iran lifts penalties that have weighed on Iranian oil for years, according to shipowners at the Marine Money Conference in New York this week.
Iranian crude is commonly transported on "shadow fleet" vessels, older, poorly insured ships that are used to bypass western sanctions to transport sanctioned crude to global markets.
The draft of the 14-point memorandum between the US and Iran, leaked yesterday, included the lifting of western sanctions and the issuance of waivers for exports of Iranian crude, petrochemical products and their derivatives, and all related services, including banking, insurance and transportation.
"Part of the agreement is that Iranian oil comes back into the fold, and that would certainly mean, over time, this oil will be transported on (mainstream) vessels," Capital Tankers chief executive Jerry Kalogiratos told the conference. Once Iranian oil is treated the same as other non-sanctioned crude, there will be no incentive for importers to use the "sub-standard ships", he said.
Iranian oil that may be relieved of sanctions under the US-Iran agreement is a completely "new barrel" to the compliant fleet, shipowner Frontline's chief executive Lars Barstad said on the panel.
Heightened demand for Iranian crude transported on mainstream fleet tankers could help support rates for crude tankers. The US Office of Foreign Assets Control's (OFAC) issuance of a general license on Venezuelan crude earlier this year — after the US captured the country's president and the subsequent increase in Venezuelan exports carried by compliant ships — has had a similar supportive effect on crude rates out of the US Gulf coast.
"It's an exceptional deal for Iran," said OFAC's former head of policy Stephanie Connor at the same conference.
Before the US-Iran conflict, China's independent refining industry was one of the main importers of Iranian crude, despite the US sanctions. With the issuance of a general license on Iranian export, countries that were sanctioned by the US would be incentivized to buy Iranian crude.
"If OFAC issues a general license on Friday, that's great, for some people," Connor said. "Mostly US adversaries who are already trading in Iran, despite US sanctions."
