Analysts predict that the tanker market may see an increase in demand
According to Fearnley Securities, new sanctions recently imposed by the United States and the European Union on "shadow fleet" tankers could generate "significant" new demand in the mainstream tanker market.
This week, the U.S. government blacklisted 13 ships, while the European Union designated an additional 65.
"The update to the US Treasury's Office of Foreign Assets Control (OFAC) list is another sign that US sanctions on Iran are ramped up," said Fredrik Dybwad and Nils Thommesen, analysts at Fearnley Securities.
More damaging is the inclusion of Iran's oil terminals company on the OFAC list, which is seen as the most significant move to curb Iran's exports to date. The objective of the sanctions is obvious: by choking off the capacity of the shadow fleet, Iran's crude oil exports will be reduced, thereby weakening its economic base. However, the edge of this sword does not stop there, it has also brought unexpected ripple effects to the global shipping market.
Analysts believe that more than 10% of the world's very large crude carriers (VLCCS) and Suezmax have now been sanctioned, while the proportion for Aframax and LR2 is close to 20%. This makes it more difficult for Iran and Russia to export crude oil and refined products.
Fearnley Securities said tougher sanctions enforcement could prompt importers to source crude from elsewhere, creating "significant" demand for tankers that are not sanctioned. It is estimated that replacing 1 million barrels per day of oil supply from the Gulf region of the Middle East to China would require 25 very large crude carriers (VLCCS).
However, Fredrik Dybwad and Nils Thommesen note: "With only five VLCS scheduled to be delivered this year, the market is likely to tighten rapidly in the coming weeks and months."
Fearnley Securities reiterated its positive view on the crude oil tanker sector and has a "buy" rating on listed crude oil tanker companies. Analysts added that almost all shipowners were trading at a discount to their net asset value, offering investors "highly attractive entry opportunities".
This week, the U.S. government blacklisted 13 ships, while the European Union designated an additional 65.
"The update to the US Treasury's Office of Foreign Assets Control (OFAC) list is another sign that US sanctions on Iran are ramped up," said Fredrik Dybwad and Nils Thommesen, analysts at Fearnley Securities.
More damaging is the inclusion of Iran's oil terminals company on the OFAC list, which is seen as the most significant move to curb Iran's exports to date. The objective of the sanctions is obvious: by choking off the capacity of the shadow fleet, Iran's crude oil exports will be reduced, thereby weakening its economic base. However, the edge of this sword does not stop there, it has also brought unexpected ripple effects to the global shipping market.
Analysts believe that more than 10% of the world's very large crude carriers (VLCCS) and Suezmax have now been sanctioned, while the proportion for Aframax and LR2 is close to 20%. This makes it more difficult for Iran and Russia to export crude oil and refined products.
Fearnley Securities said tougher sanctions enforcement could prompt importers to source crude from elsewhere, creating "significant" demand for tankers that are not sanctioned. It is estimated that replacing 1 million barrels per day of oil supply from the Gulf region of the Middle East to China would require 25 very large crude carriers (VLCCS).
However, Fredrik Dybwad and Nils Thommesen note: "With only five VLCS scheduled to be delivered this year, the market is likely to tighten rapidly in the coming weeks and months."
Fearnley Securities reiterated its positive view on the crude oil tanker sector and has a "buy" rating on listed crude oil tanker companies. Analysts added that almost all shipowners were trading at a discount to their net asset value, offering investors "highly attractive entry opportunities".
