Oil Traders Seek US Approval to Use Sanctioned Ships
Oil traders are in talks with the US government to use some tankers that were sanctioned for their involvement in shipping illicit oil, according to people with knowledge of the matter. At least four companies, including Trafigura Group, Vitol Group, Mercuria Energy Group Ltd., and Abu Dhabi National Oil Co., are discussing licenses that would allow them to purchase or lease some ships that are blacklisted by the US government.
The move comes as the Trump administration tries to address a vessel crunch and lower prices. Freight rates have surged to a record in recent weeks amid tanker shortages, and the risks of sailing through the Strait of Hormuz have increased. Ships have been forced to take on longer voyages to secure supplies, and charterers have been forced to cough up higher insurance fees.
US Officials Review Applications
Treasury officials are reviewing applications for licenses and may issue authorizations on a case-by-case basis, rather than a blanket exemption. The talks cover about 50 of the roughly 1,600 ships currently sanctioned by the US. No decision is final, and the timeframe for approvals is unclear.
The applications include supertankers, the oil industry’s largest vessels, able to transport 2 million barrels. The cost to send US oil to Asia in a supertanker climbed to nearly $40 a barrel in early October, up from $5 a year earlier. While rates have since softened, they remain near historical highs, contributing to oil prices that are hovering around $100 a barrel.
Uncertainty Remains
It’s unclear how much the measure would ultimately lower prices. The Trump administration has unleashed a series of measures aimed at lowering soaring energy costs for American consumers, including releasing millions of barrels from emergency reserves and waiving some fuel-related laws. Still, pump prices remain stubbornly elevated and were a major contributing factor to the Republican Party’s staggering losses in the midterm elections this week.
The effectiveness at lowering prices will also depend on the profile of the ships rehabilitated. Repurposing tankers that had been previously idled would have a greater impact than just changing the status of vessels operating in the dark fleet, one of the people said.
Challenges Ahead
The challenge for the Trump administration is to boost shipping capacity and lower oil prices while trying to prevent bad actors from getting an influx of cash. As of Nov. 4, there are 1,568 ships hit by US sanctions.
Original Article: Oil Traders In Talks With US To Get Sanctioned Ships Back To Sea — Gcaptain